When can you dismiss an employee for serious misconduct?

Employment contracts often contain a “get out” clause which allows for an employee to be dismissed without notice (summarily dismissed) if they engage in serious misconduct, according to Amber Chandler, partner, Barker Henley. 

Chandler added that employers can often be hesitant to use this clause as there is a risk that they might get it wrong, and the misconduct might not actually qualify as “serious” enough to deprive an employee of notice.

The regulations of the Fair Work Act 2009 define “serious misconduct” to include the following:

1. wilful or deliberate behaviour that is inconsistent with the continuation of the contract of employment;

2. conduct that causes serious and imminent risk to:

• the health or safety of a person;
• the reputation, viability or profitability of the employer's business.

3. engaging in theft, fraud, or assault in the course of the employee's employment;

4. being intoxicated at work;

5. refusal to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.

The above list is not exhaustive and there may be other conduct found to constitute serious misconduct, according to Chandler.

“It is also important to note that the above definition will only apply to cases of litigation brought under the Fair Work Act, such as an application for unfair dismissal,” she said.

“If a common law breach of contract claim is brought, then the common law approach to serious misconduct is relevant.”  

There have been many court decisions expounding on the common law meaning, including a well-known definition set out by the Commonwealth Industrial Court in O’Connor v Palmer and Others: “Without attempting to define exhaustively the word “misconduct” it involves something more than mere negligence, error of judgment or innocent mistake.”

Employment contracts may actually spell specific circumstances, although it will be ultimately up to the court to determine whether those circumstances fall within the definition.

So how can an employer go about dismissing an employee who has engaged in serious misconduct?

1. Thoroughly review the circumstances to ensure that the conduct is serious enough to warrant the summary dismissal

Chandler said that in an unfair dismissal case before the Fair Work Commission (Duddington v Mario and Clare Enterprises Pty Ltd and Morgan Trading Pty Ltd [2017]), a manager was summarily dismissed for showing disrespect by asking his employer to leave the premises and also for whistling while he worked. 

However, while the Commission found that the disrespect constituted a valid reason for dismissal, it did not support a summary dismissal, and said that the employee should have been afforded procedural fairness by being warned his job was in jeopardy because of his attitude. The procedural aspects of the dismissal in this case were found to have not even complied with the minimal requirements of the Small Business Code.

2. Before moving to summarily dismiss the employee, an objective investigation must first have established that the employee actually did engage in the serious misconduct.

In a decision by the NSW Court of Appeal (Bartlett v Australia and New Zealand Banking Group Ltd [2016]), Mr Bartlett had been summarily dismissed by ANZ for leaking a confidential email. A journalist had given ANZ an envelope with a copy of the email inside. 

ANZ had conducted a forensic examination on the handwriting on the envelope and concluded it was Mr Bartlett’s handwriting, as he was one of only 10 employees who had been sent the email. Based on the employment contract which provided “ANZ may terminate your employment at any time, without notice, if, in the opinion of ANZ, you engage in serious misconduct”, ANZ appeared well within its rights to do so as it had formed an opinion that Mr Bartlett was guilty. 

However, the Court held that ANZ’s opinion alone was not sufficient, but rather, ANZ’s opinion had to be reasonable. In this situation, the Court held it was not reasonable to conclude from ANZ’s investigation that Mr Bartlett had engaged in the alleged conduct.

Thus, the degree of misconduct required to justify summary dismissal is extremely high, and it would serve employers well not to make rash decisions in the heat of the moment, but rather first conduct a thorough consideration of all the circumstances.