Senior employees beware

Though unable to prove that their former employee had caused damage to business, this employer was justified in dismissing him for bringing the company into disrepute.

BY Rose Sneyd 18 Mar 2013

Though unable to prove that their former employee had caused damage to business, Forsyth Barr Ltd (FBL) was held to be justified in dismissing senior investment analyst Guy Hallwright for serious misconduct in a recent Employment Relations Authority (ERA) determination.

Readers will be familiar with this high profile case in which Hallwright, who was dismissed after being convicted of causing grievous bodily harm with reckless disregard, sought reinstatement. FBL dismissed him for serious misconduct, arguing that his conduct outside of work brought the company into disrepute and breached a contractual obligation ‘not to engage in activity that was likely to compromise his ability to carry out his duties.’

In outlining his concerns, Neil Paviour-Smith, managing director at FBL cited the extensive media coverage linking Hallwright to FBL, Hallwright’s public profile, the fact that public confidence in senior employees is essential to investment companies, and that FBL’s reputation had been damaged by being linked to Hallwright.

Critical to ERA member R A Monaghan’s reasoning was the fact that she did not consider FBL’s failure to prove that their reputation had been damaged essential. “Although FBL did not provide Mr Hallwright with evidence proving actual damage to its reputation in the eyes of clients or prospective clients, this was not a flaw in its procedure,” Monaghan wrote.

Instead, Monaghan suggested that the damage could be potential, rather than actual. Here, she referred to Smith v Christchurch Press Company Limited. “The employer does not have to wait for a negative impact on the working environment before dismissing an employee when such impact is inevitable. In many situations the potential for such an effect is clear enough,” the judge found.

“FBL acknowledged it could not prove an actual loss of business. Instead it pointed to the evidence of what I accept was almost constant linking in the media of Mr Hallwright and FBL as his employer, and to evidence from a senior and experienced PR consultant of the effect of this,” Monaghan wrote.

Monaghan also found that Hallwright’s conduct was incompatible with his position. “The conduct of which he was guilty discredited him personally and tainted his position overall. Accordingly the conclusion that it compromised his ability to carry out his duties was one a fair and reasonable employer could have reached,” she wrote. The dismissal was, as a consequence, justified.

Key HR Takeaways:

The statutory test for justified dismissal is outlined in section 103A of the Employment Relations Act 2000.
In Smith v Christchurch Press Company Limited, the judge held that when it comes to dismissals for conduct outside the workplace, the employer must establish a link between an employee’s conduct and the employee’s employment, and the fact that the former had an ‘adverse effect’ on the latter.
Relevant considerations include whether the employer’s business was damaged, whether the employee’s conduct was compatible with the proper discharge of his/her duties, whether other employees were impacted; and any other factors that may have undermined the necessary trust and confidence between the parties.
“[However,] the employer does not have to wait for a negative impact on the working environment before dismissing an employee when such impact is inevitable. In many situations the potential for such an effect is clear enough.”