Amid alleged misconduct, can a former business owner be fired without notice?
The New South Wales' Supreme Court recently dealt with a case involving allegations of workplace bullying, sexual harassment, and wrongful termination. The dispute centred around a senior radiologist's conduct towards a colleague and the employer's decision to summarily dismiss him.
The worker, a highly experienced radiologist, challenged his dismissal, arguing that his actions did not amount to serious misconduct. He claimed that the employer had breached their contract by terminating his employment without proper notice.
The worker also disputed the allegations of bullying and sexual harassment, suggesting that any issues were related to system problems and workplace stress rather than intentional misconduct.
‘Golden handcuffs’ deal
The worker, a radiologist with over 30 years of experience, had sold his practice to the employer in 2019. As part of the sale agreement, he entered into a three-year fixed-term employment contract with the employer. This arrangement was described as a "golden handcuffs" deal, requiring the worker to continue working in the business for a set period after the sale.
The worker received a substantial sum for the sale of his business, with the sale and purchase deed recording a completion payment of $15,000,087.00. The employment contract specified his salary and benefits, including a base salary of $500,000 per annum or 20% of billings (whichever was greater), a regional allowance of $100,000 per annum, and a clinic director allowance of $40,000 per annum.
During his employment, the worker became the subject of several complaints from a colleague, primarily related to his behaviour and communication style. The employer also received a complaint about the worker's conduct at a work Christmas party in December 2021, alleging inappropriate behaviour towards a female employee.
Employer’s decision and workplace response
Following these complaints, the employer decided to terminate the worker's employment summarily in May 2022, citing serious misconduct. The worker disputed this decision, arguing that the employer was not entitled to terminate his employment in this manner.
The worker then started legal proceedings, claiming damages for wrongful termination. He argued that the employer had breached the employment contract and repudiated it by terminating his employment without proper notice.
The case revolved around two main issues:
- Whether the employer was entitled to terminate the worker's employment summarily
- If not, what damages the worker was entitled to receive
The employer said that the worker had engaged in bullying, victimisation, and sexual harassment, which justified his dismissal. They relied on complaints from colleagues and the findings of an independent investigation conducted by Work Dynamic.
The worker denied these allegations, arguing that his conduct did not amount to serious misconduct. He said that any performance-related issues with colleagues were due to system problems and inexperience rather than intentional bullying.
Alleged bullying and sexual harassment
The court examined the evidence presented regarding the alleged bullying behaviour. The judge noted that while the worker's conduct towards his colleague was at times problematic, it did not meet the definition of bullying as outlined in the employer's workplace policies.
The court heard evidence from several witnesses, including the colleague who made the complaints, other staff members, and the worker himself. The judge found that while the worker had at times been rude and discourteous, his behaviour did not rise to the level of bullying as defined in the employer's handbook.
The court also looked at the sexual harassment allegation from the Christmas party incident. After reviewing conflicting witness testimonies, the judge concluded that the employer had not proven this allegation to the required standard.
The judge stated:
"In the circumstances, I am unable to be satisfied to the required standard that [the worker] engaged in conduct of a sexual nature towards [the employee] at the Christmas party. The allegation of sexual harassment (however it may be defined) is not made out."
Ultimately, the court found that the employer was not entitled to summarily dismiss the worker. The judge said:
"For all the reasons set out herein, I am not satisfied that the conduct engaged in by [the worker] entitled [the employer] to dismiss [the worker] without notice."
The judge emphasised that summary dismissal should only occur in exceptional circumstances:
"The right of an employer to terminate the employment of an employee summarily or without notice is a right that should only arise in exceptional circumstances. Exceptional circumstances would generally involve some form of serious wrongdoing or misconduct on the part of the employee."
In assessing damages, the court considered various factors, including the worker's age, the sale of his business, and his stated intentions regarding retirement. The judge noted:
"The reality is [the worker] was summarily dismissed three months before the expiry of the fixed term contract, in circumstances in which [the worker] was required to work for [the employer] for that three-year period, as part of the payment of a significant sum to [the worker] for the sale of his business to [the employer]."
Based on these considerations, the court awarded damages limited to the remaining three months of the fixed-term contract plus an additional three months' notice period, totalling $320,000 plus interest.
