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Employment Update – August 2016 – FWC says employee engages in ‘mortal sin’, however dismissal still unfair

In this month’s Update we examine a recent case where an employee found to have committed an act of serious misconduct was still successful in his unfair dismissal application to the Fair Work Commission. 

Outline of Facts:

The Applicant in this case was the manager of a well-known shoe store chain in a suburb of Sydney.

In September/October 2015, the manager was made aware of a series of allegations levelled against him. In total, 5 allegations were made against him, namely:

  • That he had misused his ‘family discount’ in relation to a non-family member;
  • That he retained $220 from the transaction and failed to account for the sale for 7 days;
  • That he wore a pair of shoes whilst they were on layby;
  • That he falsified time records;
  • That he removed 4 boxes of shoes from the store without explanation.

Allegations:

In relation to the first two allegations, which were directly linked: a customer came into the Blacktown store with a pair of shoes seeking to exchange them for a different size. This customer was attended to by a shop assistant, and was informed by the customer that the customer had purchased the shoes at the store in the days preceding, but she did not have a sales receipt.  The shop assistant’s search of the transactional record could not find a record of the relevant transaction.

Further inquiries by the shop assistant revealed that the customer had paid cash for two pairs of shoes. The store inventory revealed those shoes should still have been in stock.  The customer said she had paid cash to the Applicant, and taken the shoes without obtaining a receipt.  The shop assistant confirmed she could not then exchange the shoes.

Following the exchange, the shop assistant called the Applicant and told him about the situation with the customer, and the Applicant indicated that he would handle it.

Six days later the shop assistant checked the store’s stock inventory and the history of sales transactions, and found that still no record of the transaction had been noted.

The following day the inventory revealed that the stock levels and the stock on hand matched. When the shop assistant checked the records, they revealed that the applicant had conducted a sale of the shoes, which had included the application of a 20% immediate family discount.

The shop assistant reported the circumstances to the Area Manager.

Investigation:

An investigation followed, including examination of CCTV.

It was further discovered that the manager had removed a pair of shoes he had held on layby and had begun wearing them, leaving his old shoes in the shoe box in the store (the third allegation).

The Employer determined to put the first three allegations to the employee.

Meeting with the Applicant

A meeting was arranged with the Applicant and, as was subsequently found by the Commission, the Applicant was led to believe the meeting would involve him receiving good news.

In relation to that meeting it was noted in the decision:

“The employer’s purpose for the meeting was to confront the applicant with allegations that his conduct surrounding the sale and discounting of the New Balance shoes, and the removal of his Adidas shoes on layby, represented serious misconduct involving theft. The employer deliberately misled the applicant into believing that the meeting arranged for 21 September would involve him receiving good news, presumably about his performance and the results for the Blacktown store.”

The meeting proceeded, and the Applicant was advised of the first three allegations, and asked to respond in writing to the allegations the following day.

The Applicant requested further time to respond to the allegations.

In subsequent correspondence, the employer then provided two further allegations relating to the time records issue, and the removal of 4 boxes of shoes from the store without explanation (the fourth and fifth allegations).

Response in writing:

The Applicant (through his representation) then responded in writing some two weeks later and to the following effect:

“(1) admitted allegation one involving the discounting of the New Balance shoes transaction, about which an opportunity for further explanation was sought;

(2) refuted allegation two regarding pocketing of monies in respect to the sale of the New Balance shoes, but admitted that the exchange of the goods was delayed;

(3) admitted allegation three regarding the layby but indicated that the arrangement had been approved by his Manage;;

(4) refuted allegation four regarding any fraudulent recording of time actually worked; and

(5) provided explanation that the four boxes of shoes were delivered to a customer as part of a customer complaint resolution process.”

Further meeting and termination:

What became the termination meeting then took place some 3 days later.

Following an adjournment in the meeting the Applicant was provided with a termination letter that confirmed that ‘adverse findings’ had been made against him in relation to allegations 1 to 4 with the response in relation to the customer complaint resolution process being accepted.

The Applicant’s employment was terminated for serious misconduct.

Application for Unfair Dismissal

The Applicant commenced an unfair dismissal claim.

In his decision, Commissioner Cambridge examined each of the five allegations made against the Applicant.

In relation to the ‘family discount’ allegation and the delay in recording that transaction, he found that the misapplication of a family discount to a non-family member could not, on its own, be construed as serious misconduct. However, the employee was criticised for his conduct in delaying the recording of the transaction.  At [55] of the decision, Commissioner Cambridge noted:

“The applicant did not provide any plausible explanation as to why he did not rectify what he clearly understood to be a significant irregularity with there being no record of any transaction for which he permitted the removal from the store of two pairs of New Balance shoes. Frankly, anyone with even only limited experience in the retail industry would understand that taking cash from a customer and not immediately recording it in the till amounts to what might be described as a “mortal sin”.”

The Commissioner went on to find that this conduct did constitute serious misconduct and was a valid reason for dismissal.

The Commissioner also found that the wearing of the shoes whilst they were still on layby did not constitute serious misconduct, and noted that there was evidence that the application of the layby policy was not strictly adhered to. He also noted that the employee’s manager had given permission to wear the shoes whilst at work.

On the time recording issue, the Commissioner noted that the termination letter stated that findings were made against the Applicant on that issue, but that no specificity as to the allegation was provided, and that on that basis the allegation could not be considered a valid reason for dismissal.

Process

Commissioner Cambridge then criticised the process taken by the Employer in effecting the dismissal. He noted that the termination letter, provided to the Applicant following an adjournment of the termination meeting, had clearly been prepared prior to the meeting, as the letter had included a reference to the Applicant’s solicitor being in attendance, despite it being a friend of the Applicant who had attended as his support person.

Commissioner Cambridge noted that this constituted a  ‘predisposed position in respect of the allegations’ that ultimately formed the reason for the Applicant’s dismissal.

The Employer was also criticised for having misled the Applicant into believing that the initial meeting was to be a meeting where he would receive good news. In the Commissioner’s view, this impacted the Applicant having an appropriate opportunity to respond:

[68] The employer provided the appearance that the applicant was provided with appropriate opportunities to respond to the allegations that were made against him. However, the evidence revealed that the employer had formed a view of the guilt of the applicant as early as Saturday, 19 September 2015, when it took steps to deliberately deceive him about the purpose of the meeting arranged for the following Monday, 21 September 2015.

[69] The concept of the need to provide an opportunity to respond to potential reasons for dismissal particularly related to serious misconduct, is fundamentally predicated upon the decision-maker approaching the issues under consideration with an open mind such that the opportunity represented some practical and realistic potential to persuade the decision-maker to a particular view. In this instance, the employer characterised the applicant’s conduct as theft from the outset, and its subsequent treatment of any responses provided by the applicant was contaminated by the predisposed view that it held.

Significantly for employers, the Commissioner’s comments regarding the requirement to have a support person present were interesting (with particular application to potential serious misconduct matters):

 “[70] The employer’s erroneous and predisposed approach to dealing with the conduct issues that arose with the applicant extended to, what for practical purposes, amounted to a refusal to allow the applicant a support person at the first meeting held on 21 September. At this meeting the initial allegations were first conveyed to the applicant.”

Commissioner Cambridge also noted that the Employer had let the Applicant work for at least one day after it decided to put the allegations to him, and that this was inconsistent with findings of serious misconduct.

Given the procedural flaws in the Employer’s termination process, Commissioner Cambridge went on to find that summary dismissal in this case was unreasonable and unjust.

The Applicant made an application for reinstatement, but this was rejected by the Commissioner and the Applicant was instead awarded one weeks’ compensation (not a significant amount given the hearing but provided the employee with some justification for the application).

Lessons for Employers

This case emphasises the importance of following a proper process in effecting a termination, and also in conducting an investigation into allegations of serious misconduct.

Commissioner Cambridge’s comments in relation to support person are interesting in that they indicate the Commissioner’s belief that a support person should be offered to an employee even at the early stages of an investigative process where (potentially serious) allegations are being put to an employee. They also indicate that where an employer does not tell the employee of the true nature of the meeting, then that could amount to a refusal to allow a support person to be present.

Chris Campbell, Partner

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