Australia: Small Business Fair Dismissal Code - summary dismissal for out of hours conduct impacting on work

Summary

A Full Bench of Fair Work Australia (FWA) recently handed down the first full bench decision to consider the requirements of the Small Business Fair Dismissal Code (Code). The Code applies to small business employers with less than 15 employees. If an employee of a small business is dismissed in accordance with the Code, the dismissal will not be unfair.

In the decision, the Full Bench found that the termination of a hairdresser by his employer for drug taking that impacted on the employee's capacity to perform his work was consistent with the Code. In doing so, the Full Bench overturned the decision of FWA at first instance, which found that the employee had been unfairly dismissed and awarded the employee 3 weeks' pay.

Facts

The employer, a small hairdressing salon in Sydney, became concerned about one of its hairdresser's ability to perform his role as a hairdresser, in particular, the employee's unprofessional appearance and apparent behavioural issues. On 9 May 2011, the employer told the employee that it was dissatisfied with his attitude and asked him to start looking for another job.

In the early hours of 19 May 2011, the employee showed up at the house of the owners of the business. The employee claimed that he had been poisoned and that his apartment was on fire. The owners were concerned, and went with the employee back to his house. There, they found no evidence of a fire. The same night, one of the business owners overheard a conversation allegedly revealing that the employee had been using recreational drugs for an extended period of time.

On 23 May 2011, the employer summarily terminated the employment. The reason given to the employee at the time was that 'the business was not doing so well due to the financial crisis'. In evidence, it emerged that the real reason for the dismissal was the employee's drug use and its impact on the employee's capacity and conduct at work.

Summary of principles set out by the Full Bench

The Full Bench emphasised that employers generally do not have the right to control or regulate an employee's out of hours conduct, however, if an employee's conduct outside the workplace has a significant and adverse effect on the workplace then the consequences can be a legitimate concern to the employer.

The Full Bench also set out two steps required to determine whether the Code has been satisfied in cases of summary dismissal for serious misconduct by a small business employer:

• first, there needs to be consideration of whether, at the time of dismissal, the employer held a belief that the employee's conduct was sufficiently serious to justify immediate dismissal.
• second, it is necessary to consider whether that belief was based on reasonable grounds, incorporating the concept that the employer should have carried out a reasonable investigation into the matter.

Key lessons for employers

While the Full Bench emphasised that its decision should not be seen as one that would necessarily be reached in all cases involving out of hours misconduct or drug-taking, the case highlights that out of hours conduct that has a significant and adverse effect on the workplace can constitute reasonable grounds for termination of employment.

A reasonable investigation into alleged serious misconduct for the purpose of determining whether or not to summarily dismiss pursuant to the Code should usually include, at least, discussion with the employee about the perceived serious misconduct, and a demonstration that the employer has had regard to the response given by the employee in relation to the alleged serious misconduct.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.