This month we round up some recent dismissal cases that provide valuable lessons for employers when stepping the sometimes perilous path of dismissing an employee.
A dismissed employee can often be a disgruntled one, with potential to cause disharmony in the workplace even after they have left.
Dismissed employees can bring various claims against former employers, including claims for unpaid wages and entitlements, unfair dismissal, adverse action, discrimination and breach of contract.
These claims are costly and time-consuming to defend even if they don’t go to court. If they do go to court, employers may find themselves reinstating or paying compensation to an employee they had dismissed.
Whichever way it is looked at, getting dismissals right is paramount to an employer’s business. Aitken Legal are experts in assisting employers through all phases of dismissing an employee.
In this update we specifically look at some recent dismissal cases involving:
- an employee on probation;
- demotions that amount to dismissal; and
- summary dismissal for drunkenness.
$10,000 penalty for dismissing an employee on probation
The Federal Circuit Court recently ordered an employer to pay a former employee just over $10,000 after it sacked her during her probationary period.
The employee was a store supervisor and had made a number of complaints about staff, the business, rostering and management during her 5 months of employment.
The employee was ultimately dismissed with the termination letter giving no reason why. When the employee asked the reason, the employer told her it was not legally obliged to provide a reason.
The employee brought an adverse action claim against the employer alleging she was dismissed because she had exercised a workplace right by making complaints about her employment.
The Court agreed with the employee and found that the employer had not proven that one of the factors in dismissing the employee had not been because she had made complaints.
The Court held that given the nature of the employee’s complaints, it was difficult not to conclude that they formed a substantial part of the reasons for dismissal.
The employer was ordered to pay the employee just over $10,000 for lost wages, accrued annual leave, superannuation and interest.
Lessons for employers
Whilst an unfair dismissal claim may not be an option, an employee dismissed during a probationary period could bring an adverse action claim under the general protections provisions of the Fair Work Act.
Also, if an employer does not give a reason for dismissal, an employee may make assumptions, seek advice and make a claim. Employers should consider giving a reason even where a dismissal occurs during a probationary period.
Demotion can amount to dismissal
Late last year the Fair Work Commission handed down a couple of decisions which found that the demotion of an employee was in fact a ‘dismissal’ under the Fair Work Act. The cases are briefly summarised below.
Whitfield v Master Tree Ninja  FWC 6666
In this case, the employer had performance concerns about the employee and met with the employee to remove him from his leading hand role.
There was some disagreement about whether the employee was dismissed or resigned but ultimately the employee brought an unfair dismissal claim against the employer.
The employer argued the employee had not been ‘dismissed’, that there was no intention to end the employment relationship and that the employee himself had ended his employment.
The employee argued that the employer had materially altered the employment contract when demoting him and that this was a ‘dismissal’ under the Act.
The Commission agreed with the employee and found that unilaterally removing the employee from his leading hand role was a repudiation of the employment contact. This was a termination on the employer’s initiative and a ‘dismissal’ under the Act.
The Commission found that the dismissal took effect when the employee was advised that he would be no longer be doing the leading hand role.
The Commission then went on to find that the dismissal was unfair because the performance issues were not a valid reason for dismissal (and simply may have warranted counselling or a warning). Also, the employer had not given the employee any advance warning or notice of the performance issues nor an opportunity to respond or rectify the issues.
Fortunately for the small business employer with cash-flow issues, the Commission found that the employment would have likely ended soon after and so the compensation was limited to just under $2,500.
Lessons for employers
Unilaterally deciding to demote an employee may amount to a dismissal on the employer’s initiative, even where there was no intention to reduce remuneration or to end the employment relationship.
An employer in this position should have considered raising the performance issues with the employee and providing a chance to respond and improve performance. Particularly before considering demotion and how that might be implemented including how it might be conveyed to the employee. Each set of facts needs to be examined carefully before disciplinary actions are taken, and advice is best obtained.
Scott Harrison v FLSmidth Pty Limited  FWC 6695
In this case, the employer demoted an employee from a service supervisor role to a technician role for breaching its drug and alcohol policy.
Interestingly, it was the employee who had suggested demotion and he was still employed in the demoted role when he made an unfair dismissal claim.
The employer argued the employee was not ‘dismissed’, that the demotion was authorised by the employment contract and that, as the employee had suggested it, it was not at the employer’s initiative.
The Fair Work Commission rejected these arguments and found that the employee’s demotion was in fact a dismissal under the Fair Work Act.
The Commission held that:
- The employee’s demotion resulted in a significant reduction of pay (of 9.3%) and duties (he no longer supervised other employees, had no direct client contact and no longer worked from an office but worked onsite) and thus it was a dismissal under the Act.
- The employment contract did not authorise the demotion as it only allowed the employer to require the employee to perform a different role ‘to meet business opportunities’, not due to misconduct. There were no unwritten or implied terms in the contract allowing the demotion.
- While the employee had suggested demotion, there was no discussion about the drop in pay that might come with a demotion and so the terms were uncertain. As such it was not open to the employer to simply accept demotion. The action of the employer was the main contributing factor to the demotion and it was at the employer’s initiative.
Lessons for employers
A demotion can be a dismissal under the Act even where the employee suggests the demotion and is still employed in the demoted role.
If a demotion is being considered by an employer or is suggested by an employee, the employer should discuss the terms of the demotion with the employee and ensure there is clear understanding of the outcomes of demotion before that is imposed or agreed. If there is agreement, then there should be confirmation of this with the employee and in writing. It should always be the case that the disciplinary action of demotion is appropriate in the circumstances of the findings.
Note the Commission stated that whether an employment contract authorises a demotion is irrelevant to the question of whether there was a ‘dismissal’ under the Act (but may be relevant regarding the fairness of the dismissal).
Employers should have strong, carefully drafted employment contracts, and allowing an employee’s role to be changed in a range of circumstances.
Summary dismissal for drunkenness
The Fair Work Commission has recently ordered an employer to reinstate an employee and pay her lost wages, finding the summary dismissal of the employee following drunken conduct at a client function was unfair.
The employee was a project administrator for an electrical contractor and worked onsite at the employer’s major client, the Sydney Opera House.
During an after hours farewell drinks for an opera house employee, the employee became intoxicated and admitted to vomiting on the floor in the bar area and being assisted to the bathroom and into a taxi.
The employer investigated the incident and advised the employee she had also been overheard insulting co-workers and employees of the client as well as making sexual propositions to an employee of the client.
The employee denied making insults or propositioning anyone, sought further details from the employer about the allegations and indicated she had witnesses to support her version of events.
The employer rejected this and ultimately summarily dismissed the employee due to ‘serious misconduct’. The employee lodged an unfair dismissal claim.
The Commission held that the only misconduct that actually occurred was the vomiting and that this was not a valid reason for dismissal, let alone summary dismissal. “Frankly, if one act of inoffensive drunkenness at an after work function provided valid reason for dismissal, I suspect that the majority of Australian workers may have potentially lost their jobs.”
The Commission found the employer’s evidence about the disparaging remarks to be inconsistent and that it appeared to have been reconstructed. The evidence of the employee and her witness was preferred.
The Commission also found it astonishing that the employer knew that the Opera House employee had stated that he had not been propositioned but that it still relied on this as a reason for dismissal.
The Commission stated that the absence of any immediate suspension or restriction of work of the applicant meant that the employer could not later summarily dismiss the employee.
In relation to the investigation, and dismissal procedure the Commission found that the employer had conducted an “incomplete and truncated” investigation and that the employee was not given sufficient details of the allegations to allow her to properly respond.
The Commission also found that it was unreasonable that the employer had asked the employee to reconsider her choice of support person which consequently meant that she attended the disciplinary meeting without one.
The employer was ordered to reinstate the employee and pay her lost wages.
Lessons for employers
There are a number of lessons for employers from this case.
Firstly, summary dismissal should be used for only the most serious of cases where there has been ‘some very serious wrongdoing’.
The Commission stated that “…Any employer should be very cautious about invoking a summary dismissal, as opposed to dismissal with the required notice”.
The question considered by the courts is whether the employee’s conduct is so inconsistent with their duties under the employment contract that it strikes down any reasonable suggestion that the relationship can continue.
Employers should also immediately suspend or restrict the work of an employee on becoming aware of alleged serious misconduct that may warrant summary dismissal whilst an investigation takes place. Allowing an employee to continue working will deprive the employer of the ability to later summarily dismiss the employee.
In relation to investigations and procedural fairness, employers should:
- allow employees to have the support person of their choosing at disciplinary meetings;
- ensure that they provide sufficient details of allegations to the employee so that they have a proper opportunity to respond and to hear and consider the employee’s response;
- ensure that investigations, (particularly into serious misconduct and relied on to support a summary dismissal) are fair and complete; and
- ensure that the reasons for dismissal are established by and evidenced by the facts.
Contact us for assistance
If you would like advice about managing problematic or difficult employees, dismissing an employee, avoiding or dealing with general protections claims, unfair dismissal claims or any other dismissal or employment related matter, please contact us.
Disclaimer: The information contained this update is intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation. Contact Aitken Legal here.