Australia: Unfair Dismissal Update - August 2018

Last Updated: 28 August 2018
Article by Stephen Trew, Ashleigh Mills, Natasha Jones and Georgie Richardson

Most Read Contributor in Australia, September 2018

Recent unfair dismissal decisions of the Fair Work Commission (Commission) provide a number of lessons and reminders to employers:

  • a number of dismissals were found to be unfair not because there was an absence of a valid reason for dismissal, but rather because of procedural and other matters under section 387 of the Fair Work Act 2009 (Cth) (FW Act)
  • out of hours conduct continues to be recognised as a valid reason for a dismissal, including in circumstances where employers operate in safety-critical industries
  • where mutual agreement is reached in relation to the termination of employment, employers should always carefully consider the scope and content of any 'release' sought from an employee, in order to avoid unexpected claims.

In this article, we will take you through some of these recent unfair dismissal decisions from the Commission and identify key takeaways for employers.

Harsh dismissal: a valid reason to dismiss is not enough

A recent decision of the Commission is a timely reminder that having a valid reason for dismissal is not enough. In Mark Andrawos v My Budget Pty Ltd [2018] FWC 4288, the Commission found that despite My Budget Pty Ltd (My Budget) having a valid reason to dismiss Mr Andrawos, My Budget's procedural failings leading to the dismissal, and its failure to consider the substantial mitigating factors raised by Mr Andrawos during its investigation process, rendered Mr Andrawos' dismissal harsh and therefore 'unfair'.

Mr Andrawos was employed by My Budget as a Personal Budget Specialist. He had a personal friend, James, who later became a client of Mr Andrawos and My Budget. James was a young man who had received a significant inheritance.

In events which ultimately lead to Mr Andrawos' termination, Mr Andrawos attended a casino with James. While at the casino, in what the Commission accepted was a well-intentioned and honest attempt to curb James' gambling habits, James gave to Mr Andrawos $150 to hold on his behalf so that he couldn't gamble it, and Mr Andrawos persuaded James to invest the balance of his $140,000 inheritance into a My Budget co-signatory account.

Following the Casino visit, My Budget terminated Mr Andrawos' employment after receiving a complaint from James' mother (the Complainant) and conducting an investigation, for reasons including:

  • "serious misconduct" in his dealings with James causing or having the potential to cause reputational damage to My Budget. In particular, this related to providing unsolicited financial advice and services that MyBudget was not permitted to provide under its financial services licence. This included advice regarding mobile phone contracts, car insurance and property investment. Mr Budget also relied on Mr Andrawos attending a casino with a client, holding a client's cash and requesting a client to transfer cash to a co-signatory company account
  • "serious misconduct" in mismanaging a conflict of interest in dealings with James, by failing to manage his personal and professional relationship with James.

After finding that the reasons set out above constituted a valid reason to dismiss Mr Andrawos, the Commission turned to the question of whether the dismissal was unfair for being either harsh or unjust or unreasonable.

Given the seriousness of Mr Andrawos' misconduct, the Commission concluded that the termination was not unreasonable, and in light of Mr Andrawos's poor disciplinary record, which contained other conduct and performance issues, the Commission found that the dismissal, in these circumstances, was not unjust.

On the remaining question of harshness, Mr Andrawos argued that My Budget pre-determined that it would terminate Mr Andrawos's employment and as a consequence My Budget failed to consider Mr Andrawos' responses to the allegations with an open-mind.

The Commission considered eight matters which supported Mr Andrawos' contention that My Budget was 'simply going through the motions' and failed to consider Mr Andrawos' response to the alleged conduct:

  • at the time of suspending Mr Andrawos, the decision maker gave evidence that she had formed the view that the conduct was likely to be serious and wilful misconduct
  • the employer had provided a short timeframe (24 hrs) between issuing its allegations letter and requesting Mr Andrawos to provide a response. While My Budget provided an extension to this timeframe, the initial timeframe was unreasonable given the seriousness of some of the allegations and the breadth of subject matters in the allegation letter;
  • whilst the Commission found the decision to suspend Mr Andrawos reasonable, it was found to be unreasonable for My Budget to have prevented Mr Andrawos from putting material to and speaking to his managers, prior to the disciplinary meeting. Specifically, after Mr Andrawos was suspended, My Budget's Human Resources Manager and Mr Andrawos' direct Manager refused to speak with Mr Andrawos and blocked his calls until the formal investigation process commenced
  • My Budget denied Mr Andrawos access to the statements it had obtained from employees, stating that the allegations were sufficiently set out in the allegation letter. However, the Commission found that Mr Andrawos's response was partly based on the credibility of the statements provided, and that Mr Andrawos was entitled to know who had made the allegations and a level of detail that went beyond the allegation letter
  • My Budget relied upon telephone recordings, and transcriptions of those records, as evidence of misconduct, but failed to provide copies of the recordings to Mr Andrawos upon his request. The Commission found that these recordings provided evidence in mitigation of the allegations against Mr McBryde and that the failure of MyBudget to provide these to Mr Andrawos showed a propensity to focus on the breach at the expense of explanation or mitigation
  • My Budget had relied upon a selection of text messages and failed to show this selection to Mr Andrawos. The Commission took the view that had Mr Andrawos known which text messages had been provided to My Budget, Mr Andrawos would have been in a better position to produce other messages that would have painted a fuller picture in explanation or mitigation
  • My Budget should have sought out or been briefed on that background between the Complainant and Mr Andrawos and should have made itself aware of threatening statements made by the Complainant to Mr Andrawos the evening before the Complainant lodged her complaint with My Budget. In particular, My Budget relied solely on the statement of the Complainant, which accused Mr Andrawos of scheming and profiting from his relationship with James, and made no attempt to speak with James directly regarding his relationship with Mr Andrawos at any point during the investigation to verify the Complainants allegations or motive
  • My Budget did not conduct any further fact-finding after the disciplinary meeting with Mr Andrawos, despite Mr Andrawos raising facts unknown to My Budget.

In addition, the Commission identified numerous mitigating factors which were raised by Mr Andrawos, but which My Budget failed to consider when it made the decision to terminate Mr Andrawos's employment. The Commission found that these matters demonstrated that My Budget had pre-determined the disciplinary outcome of its investigation.

In light of the substantial mitigating factors and the evidence that My Budget had pre-determined the outcome of its investigation, the Commission found the dismissal unfair by reason of harshness.

This decision is a reminder to employers of the need to maintain an 'open-mind' to the outcome of a workplace investigation and the importance of genuinely considering an employee's responses to allegations of misconduct. The procedural failings considered by the Commission in this case also provide concrete examples for employers of the procedural matters that should be considered when conducting a workplace investigation which may lead to a disciplinary outcome.

Dismissal for out of hours conduct

Flight attendant misbehaviour on a wild night out

In Luke Urso v QF Cabin Crew Australia Pty Limited T/A QCCA [2018] FWC 4436 the Commission considered whether a flight attendant, Mr Urso, was unfairly dismissed for his out of hours conduct after he failed to attend for work following a night out in New York.

Mr Urso had visited a bar with another employee and was later discovered by his colleague collapsed on the floor of the toilets. He was subsequently taken to hospital where his blood alcohol concentration was tested and found to be 0.205%.

Mr Urso was discharged from hospital the following day and was due to operate a flight departing that afternoon, but instead contacted his manager to advise that he was still feeling unwell and would not attend for work.

Upon return to Brisbane, Mr Urso was met by Qantas' Service and Performance Manager who advised him that he would not be permitted to operate a flight until he was medically cleared to do so. Qantas commenced an investigation into the flight attendant's conduct and the events in New York. The investigation found that Mr Urso had consumed in excess of five standard drinks and he had breached the employer's policies and procedures. In particular, Mr Urso had:

  • failed to ensure that while on slip (time off duty between flights) he was adequately rested and able to perform his next operational duty
  • failed to be ready, willing and able to perform his next operational duty
  • failed to abstain from activity that would increase the risk of illness which would prevent him from performing his next operational duty
  • consumed excessive alcohol while on slip.

Following the investigation, which the Commission deemed to have been conducted appropriately, Mr Urso was dismissed on the basis of misconduct.

The Commission asserted that it is well established that in some circumstances an employee may be validly dismissed because of out of hours conduct. It was held that employees have obligations to perform their duties in accordance with their contract of employment including complying with reasonable directions given by their employer. The obligation is to be ready, willing and able to perform their duties at the relevant time when an organisation clearly relies on the employee in circumstances where their absence cannot be properly remedied by a substitute person or the transfer of duties to others. Therefore the conduct engaged in by Mr Urso amounted to a valid reason for his dismissal.

The issue of off duty conduct of flight attendants in slip ports was considered previously in Roach v Qantas Airways Limited [2001] AIRC 1346. There it was held that from the point when a flight attendant signs on for a pattern of duty, including 'slip time', they are in a safety critical role, for which Qantas is subject to regulation by the Civil Aviation Safety Authority. Similarly, in Farquharson v Qantas Airways Limited [2006] AIRC 488 the Full Bench found that it was "the peculiar circumstances attending slip time in a foreign port that gave Qantas a legitimate interest in the slip time conduct of its flight crew that is far greater than the usual interest of an employer in the off duty conduct of its employees".

These decisions highlight that employees may be validly dismissed for out of hours conduct where employers can establish that there is a relevant connection between the employment and the employees out of hours conduct, particularly if such conduct occurs within the parameters of safety critical industries.

Mine-workers' Facebook posts with the capacity to affect operations

In another recent case, Marc Waters v Mt Arthur Coal Pty Limited T/A Mt Arthur Coal Pty Limited [2018] FWC 3285, which we covered in an earlier article in June this year, a coal mine operator was found to have fairly dismissed an employee who made several Facebook posts relating to mine operations, after-hours and on a personal device.

In this case, the employee, Mr Waters, made several Facebook posts in the lead up to Christmas regarding whether the mine was operating on Christmas and Boxing Day. The final Facebook Post from Mr Waters was made on Christmas Eve and stated that "Xmas & Boxing days [sic] shifts are off for good" (the Facebook Post).

The Facebook Post was made in the context of safety concerns raised by a number of workers regarding operations at the mine on Christmas and Boxing Day and numerous oscillating decisions and announcements from Mt Arthur Coal Pty Ltd (Mt Arthur) regarding whether the shifts would go ahead. There was no evidence that the Facebook Post disrupted Mt Arthur's operations, however, the Commission accepted that the Facebook Post had the potential to disrupt the mine's operations.

Mt Arthur argued that it had a valid reason to dismiss Mr Water for conduct which breached several terms of the applicable workplace Code of Conduct and Charter of Values. Importantly, Mr Waters was aware of, and was trained in, these policies.

Mr Waters argued, among other things, that his dismissal was unfair because the conduct which Mt Arthur relied upon to terminate his employment happened out of hours.

The Commission found that Mt Arthur had a valid reason to dismiss Mr Waters and that the dismissal was not otherwise 'harsh, unjust or unreasonable' for any of the reasons set out in section 387 of the FW Act. A key factor relevant to the Commission's decision was that the Facebook Post related directly to work matters and the post was in breach of an existing workplace policy which prohibited that conduct.

On the relevance of workplace policies in unfair dismissal proceedings, the Commission referred to the earlier decision of B, C and D v Australian Postal Corporation T/A Australia Post [2013] FWCFB 6191 which stated that "It is the reason of the employer, assessed from the perspective of the employer that must be a 'valid reason', where 'valid' has its ordinary meaning of 'sound, defensible or well founded'... conduct in breach of a workplace policy will often, if not usually, constitute a 'valid reason' for dismissal.".

The Commission went on to confirm the circumstances when out of hours conduct may constitute a valid reason for dismissal, being when the conduct has a relevant connection to the employment relationship. The Commission summarised the factors to be considered when determining whether a 'relevant connection' exist, which include:

  • whether the conduct, viewed objectively, is likely to cause serious damage to the relationship between the employee and employer
  • whether the conduct damages the employer's interests
  • whether the conduct is incompatible with the employee's duty as an employee.

The decision highlights the need for employers to:

  • have in place workplace policies which address the social media risks relevant to their business, and which also apply to social media use by employees outside of work hours using personal devices
  • ensure that there is a relevant connection between an employee's social media use and their employment before intervening in an employee's outside of work social media use.

Signing on the Dotted Line: Exceptions to a Full 'Release' from Future Debts and Claims

An interesting jurisdictional objection was recently ventilated before the Commission involving the effect of a 'moratorium on claims' clause contained within a Deed of Company Arrangement on unfair dismissal applications which had been made by two parties to that Deed.

In Durado & Isugan v Foot & Thai Massage Pty Ltd [2018] FWC 4711, the employer argued that the applications could not proceed by reason of a clause in the DOCA which prohibited creditors from taking any steps, including to commence or continue, a claim as against the employer. 'Claim' was relevantly defined to include, amongst other things, 'all current or contingent claims arising out of or in connection with the employees' employment relationship with the Company...and which exist as at the Appointment Date [being 15 December 2015]'. The employer submitted that its position in these proceedings was consistent with, and supported by, that which was required by sections 444A-444J of the Corporations Act 2001 (Cth).

On the other hand, the Applicants argued that their unfair dismissal applications could proceed on the basis that they were not creditors, and also that there was no 'Claim' to compensation for unfair dismissal as at the Appointment Date (notwithstanding that they had made their applications by that time). In relation to the former, they argued that they could not properly be considered creditors in circumstances where they had only a 'mere expectation' that a right to compensation for unfair dismissal might be granted. In relation to the latter, the applicants argued that:

  • in order to be a 'claim' there must be a crystallised right and corresponding obligation
  • in this case, the only 'right' that existed at the Appointment Date, was the 'right' to make an unfair dismissal application (and not any 'right' to receive compensation for that application having been made).

In that way, the Applicants sought to distinguish prospective compensation for unfair dismissal from, for example, crystallised rights to superannuation or accrued leave entitlements.

Ultimately, the Commission found in favour of the Applicants and held that the Applicants were not properly to be considered 'creditors', nor did they have a 'claim' as at the Appointment Date in relation to their unfair dismissal applications for the purposes of the DOCA. In reaching this conclusion the Commission agreed that, in order for a claim to be provable in the winding up of a company there had to be an existing legal obligation to pay as at the relevant appointment date. In this case, it was held, there was not.

This case highlights some important aspects of the nature of the unfair dismissal jurisdiction in the context of the insolvency provisions in the Corporations Act 2001 (Cth). Separately and in addition, it also serves as a timely reminder for employers to ensure that careful consideration is given to the way in which deeds of settlement and release - together with other documents recording or referencing the termination of employment - are drafted. In particular, where an employer is seeking to ensure that all current or prospective future debts are extinguished, it is critical that the form of release clauses are reviewed on a case by case basis, taking into account the particular contingencies of that employment relationship and the circumstances of the termination.

Lessons for Employers

These recent cases highlight the need for employers to:

  • maintain clear policies setting out expectations for employee conduct
  • before investigating or acting on any out of hours conduct, ensure that there is a relevant connection with the employee's employment
  • ensure that actions and communications evidence that they have approached any workplace investigation with an open-mind and without pre-judging the disciplinary consequences which may flow from an investigation's findings. Practically, employers should try to separate an investigations finding's from the disciplinary consequences that follow. Further, before a decision maker makes a final decision to terminate an employee's employment, the employee should also be provided with a genuine opportunity to show cause why their employment should not be terminated and the decision maker should genuinely consider those reasons
  • ensure that employees are provided with an adequate opportunity to respond to allegations, which includes:
    • proving the employee with sufficient information regarding the allegations to enable the employee to provide a response
    • providing the employee with a reasonable amount of time to provide a response given the number and nature of allegations.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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