Key Points:

Employers need to think carefully and conduct a "reasonable investigation" before summarily dismissing an employee who is charged with a criminal offence arising from conduct allegedly committed outside the workplace.

The Fair Work Commission's decision in favour of an apprentice butcher sacked after being charged as an accessory to murder has generated much media commentary, some of it incredulous. This seems to be based on a belief that when an employee is charged with a criminal offence (even if the conduct has no direct connection whatsoever with the employment) the employer has an automatic right to terminate employment.

As the recent decision in James Deeth v Milly Hill Pty Ltd [2015] FWC 6422 shows, this is simply misconceived. While serious misconduct, both in and outside the workplace, can lead to a valid basis for dismissal, the employer must avoid a knee-jerk reaction; instead it must adhere to an appropriate pre-dismissal process and, in particular, afford the employee procedural fairness.

Mr Deeth is summarily dismissed for his out of work conduct

James Deeth was an apprentice butcher with Milly Hill, a meat supplier with retail operations in New South Wales.

On 21 September 2014, Mr Deeth was charged with being an accessory after the fact to murder. The following morning, Mr Deeth's father contacted Jamie Latham, a manager of Milly Hill, to advise him that Mr Deeth would not be attending work that day as he was in custody. Later that evening, Mr Deeth's father also spoke with Peter Strelitz, the director of Milly Hill, to explain the situation.

On 24 September 2014, Mr Deeth was granted bail.

On 25 September 2014, Mr Strelitz contacted Mr Deeth's mother to discuss Mr Deeth and the charges laid against him. During that conversation, Mr Strelitz expressed his concerns about the reputational damage that was likely to be caused to Milly Hill by Mr Deeth's criminal charges.  

On 26 September 2014, Mr Strelitz told Mrs Deeth that Mr Deeth was no longer required to attend work and that his employment would be terminated with immediate effect.

Mr Deeth then went to the Fair Work Commission, arguing that the dismissal was "harsh, unjust or unreasonable" and "not consistent with the Small Business Fair Dismissal Code" (sections 385(b) and 385(c) of the Fair Work Act 2009 (Cth)).

Was the dismissal consistent with the Small Business Fair Dismissal Code?

The Small Business Fair Dismissal Code is meant to be a guide that, if followed, offers protection to small businesses such as Milly Hill. Senior Deputy President Hamberger considered this as a first step.

Milly Hill argued that the dismissal was consistent with the Code "because he [Mr Deeth] had engaged in conduct that causes serious and imminent risk to the reputation, viability or profitability of the employer's business" and was therefore liable to be dismissed summarily for serious misconduct.

SDP Hamberger accepted that Mr Strelitz held a belief at the time of Mr Deeth's dismissal that his actions "were sufficiently serious to justify immediate dismissal", and that the first step was satisfied. However, SDP Hamberger did not consider that Mr Strelitz had reasonable grounds to believe this, as Milly Hill had failed to take appropriate steps to "reasonably investigate the matter".

Was there a valid basis for dismissal?

Milly Hill contended that it had a valid reason to terminate Mr Deeth's employment because:

  • the other employees at the retail butcher store would resign if Milly Hill continued to employ Mr Deeth, resulting in the business no longer being viable; and
  • customers would boycott the retail butcher store if Milly Hill continued to employ Mr Deeth, which would have a devastating financial impact on the business.

SDP Hamberger's starting point was that:

"what an employee does on his or her own time is a matter for him or her. There is no presumption that a criminal conviction alone is a valid reason for termination of employment, particularly where the criminal offence was committed outside of work. Even conduct outside of work involving criminal offences does not, alone, warrant dismissal".

An employer who wishes to summarily dismiss an employee for criminal conduct committed outside of the workplace must show a "relevant connection" between the criminal activity and the employee's employment.

While SDP Hamberger concluded that Milly Hill had a legitimate basis for being concerned about the reputational damage that could ensue, and there was a valid reason to dismiss Mr Deeth, Milly Hill's failure to afford Mr Deeth procedural fairness was fatal to its case.

Poor process made the dismissal harsh and unjust

In concluding that the dismissal was harsh and unjust, SDP Hamberger took into account the following factors:

  • Mr Deeth was not notified of the reason for his dismissal until after it took effect and subsequently did not have an opportunity to respond;
  • Mr Sterelitz communicated the dismissal to Mr Deeth's mother, not to Mr Deeth directly; and
  • at the time of his dismissal, Mr Deeth was nearing the completion of his apprenticeship, and had not been able to secure alternative employment following his dismissal in order to complete it. Further, Milly Hill had failed to "put sufficient thought" into whether it could retain Mr Deeth and still "mitigate the perceived risks in relation to its employees and customers".

Remedy: compensation ordered

As Mr Deeth did not seek reinstatement, and the Commission was satisfied that it was not appropriate in the circumstances, SDP Hamberger ordered Milly Hill to pay Mr Deeth six weeks' wages in compensation.

Lessons for employers from the Deeth case

Although the circumstances in the Deeth case were highly unusual, at its heart were two challenging issues for employers: the relevance of an employee's private conduct to his or her employment, and summary dismissal for serious misconduct.

Employers therefore need to proceed with caution. This can be a challenge, especially when an employee's private acts bring the full glare of publicity upon the employer. Nonetheless, the employer must keep calm and avoid what SDP Hamberger called a "knee-jerk reaction to the news he had been charged, fuelled by reports of customer and employee dissatisfaction".

There are three things employers must keep in mind.

Generally speaking, it is only in exceptional circumstances that an employer will be able to extend the eye of Big Brother over the private activities of an employee. If, however, that private conduct gives rise to a real and serious risk of damage to an employer's financial and commercial interests then this can attract the legitimate concern of an employer, even if no damage is actually caused, and may, depending on the circumstances, warrant dismissal. The analysis is centred not on the morality of the situation, but upon the risk of harm to the employer.

Whether that dismissal can be summary (ie. instant dismissal or dismissal without notice) will depend upon whether there has been "serious misconduct". What constitutes serious misconduct for the purposes of summary dismissal will depend upon the facts and circumstances of each individual case. As summary dismissal is the harshest form of discipline that any employer can impose, employers should be cautious when seeking to terminate an employee's employment on the basis of serious misconduct.

Finally, even if summary dismissal is appropriate in the circumstances, employers must still afford employees procedural fairness in the dismissal process. Employers cannot be trigger-happy when considering whether to summarily dismiss an employee. This is even where the employer might believe there to be a moral imperative to terminate. Although this particular case was under the Code, the same considerations apply to larger employers.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.