Getting the chop: When out of hours criminal conduct justifies dismissal

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1 Ashurst Australia 5 November 2015 Employment Alert Getting the chop: When out of hours criminal conduct justifies dismissal Deeth v Milly Hill Pty Ltd [2015] FWC 6422 WHAT YOU NEED TO KNOW The Fair Work Commission has recently confirmed the limitations on an employer's ability to take disciplinary action in relation to an employee's out of hours conduct that results in the employee being charged with, or convicted of, a criminal offence. An employer's right to take disciplinary action against an employee for out of hours conduct is premised on whether there is a relevant connection between the employee's conduct and the employee's employment. This will depend on whether the conduct, when viewed objectively, is likely to cause serious damage to the relationship between the employee and employer, damage the employer's interests or is incompatible with the employee's duties as an employee. There is no general presumption that allows an employer to terminate an employee's employment in circumstances where the employee has been charged with or convicted of a criminal offence. WHAT YOU NEED TO DO It is critical that employers make reasonable efforts to investigate any alleged criminal conduct before taking disciplinary action against an employee. The employer must be able to reasonably form a view (on the balance of probabilities) that there is a relevant connection between the employment relationship and the employee's conduct having regard to the particular circumstances of the case. Employers need to do more than simply rely on the outcome of the police investigation without making their own independent enquiries. Employers should review their policies, procedures and template contracts to assess whether these documents adequately deal with the potential for termination of employment in circumstances where the employee has been charged with or convicted of an offence, and where the charge or conviction results in the employee being unable to perform his or her duties. To mitigate the risk of an unfair dismissal claim, employers need to provide procedural fairness to employees. The right to terminate for out of hours conduct In a recent decision of Senior Deputy President Hamberger, the Fair Work Commission has reconfirmed the limitations on an employer's ability to take disciplinary action in response to an employee's out of hours conduct, particularly where that conduct involves a criminal offence. The decision is consistent with the long standing case authorities on this issue which state that conduct that occurs outside of work and that involves a criminal offence does not alone warrant dismissal. Instead, there must be a relevant connection between the employee's conduct outside of work (the criminal activity) and the employee's employment. SDP Hamberger's decision On 28 October 2015, Senior Deputy President Hamberger handed down his decision in Deeth v Milly Hill Pty Ltd [2015] FWC As the employer had fewer than 15 employees, the case was determined by reference to the employer's AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN PAPUA NEW GUINEA SAUDI ARABIA SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA

2 obligations under the Small Business Fair Dismissal Code. Whilst SDP Hamberger ultimately determined that there was no basis for summary dismissal, he nevertheless concluded that there was a valid reason for dismissal having regard to the particular facts of the case. the same co-worker had reported that in the weeks leading up to his dismissal, the employee had threatened aggression towards unidentified people while at work; and a customer had reported that she and certain customers of her pottery business would not frequent the store if the employee continued to work there. Facts The employee was an apprentice butcher. His employer operated a small retail butcher shop in the regional town of Kempsey, New South Wales, as well as supplying wholesale meats to nearby and interstate restaurants. At the time of his dismissal, the employee was in the third and final year of his apprenticeship. The employee was charged with being an accessory after the fact to murder. He was subsequently granted bail. Upon learning of the charges against the employee, his employer summarily dismissed him on the basis that: the other employees at the shop would resign if he continued to remain employed, resulting in the business no longer being viable; and customers would boycott the shop if the employee continued to remain employed, impacting adversely on the profitability of the business. The employer asserted that its decision was consistent with the Small Business Fair Dismissal Code. The Code provides that: "It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures " No reasonable investigation meant summary dismissal not justified SDP Hamberger found that there was insufficient evidence before the Commission to support the reasons for termination that were proffered by the employer. Specifically: there was no evidence provided by any co-worker to suggest that they would have considered resigning had the employee continued to be employed. In fact, the co-worker who had complained about the employee was already working out his notice period at the time that the complaint was made; and the concerns that had been raised by the customer of the store were more directed towards the fact that she felt bullied by the employee in relation to a parking space issue rather than the fact of his criminal charges. As a result, SDP Hamberger concluded that the employee's conduct fell short of 'serious misconduct' as defined in the Code. He concluded that because the employer had failed to conduct a reasonable investigation into the matter, the employer did not have reasonable grounds to believe that the employee's conduct was sufficiently serious to justify immediate dismissal. SDP Hamberger described the employer's decision to summarily dismiss the employee as "a knee-jerk reaction to the news that Mr Deeth had been charged, fuelled by reports of customer and employee dissatisfaction". Valid reason existed for dismissal As to the issue of whether there was a valid reason for dismissal, SDP Hamberger cited the previous authorities, noting that: The employer relied on the following evidence to support its decision to summarily dismiss the employee: a co-worker had reported that he would not like to work with the employee and would rather not work for the employer anymore if the employee returned; While it is not the case that out of hours conduct can never be a valid reason for dismissing an employee, the starting point must be that what an employee does in his or her own time is a matter for him or her; There is no presumption that a criminal conviction alone is a valid reason for termination of employment, particularly where the offence was committed outside of work; and Ashurst Employment Alert 5 November

3 There must be a relevant connection between the criminal activity and the employee's employment. In deciding that there was a relevant connection between the employee's employment and his out of hours conduct, SDP Hamberger considered that the following factors were relevant: the offence to which the employee was charged as being an accessory was a violent offence; the employer's business was a small operation in a country town; the employee had, while at work, engaged in threating behaviour; the employee's work involved the use of sharp knives; and the murder had been given significant publicity in the local media. Relevantly, as the person charged with committing the murder was a minor at the time, his name had not been published in the media and the employee was the only alleged offender to be named in the media. SDP Hamberger concluded that the conduct had a relevant connection to the employee's employment because: it was legitimate for employees and customers of the employer to be concerned about the employee continuing in his employment at the store; and it was possible for members of the local community to conflate the identify and charges of the two alleged offenders. The outcome Although SDP Hamberger concluded that there was a valid reason for dismissal, the dismissal was nonetheless harsh and unjust (although not unreasonable) because the employee had not been afforded notice of his dismissal or an opportunity to respond. SDP Hamberger also considered the fact that the employee was two-thirds of the way through his apprenticeship and had been unable to secure alternative employment to complete that apprenticeship. SDP Hamberger ordered the employer to pay the employee six weeks' pay. The approach to out of hours conduct in previous cases discipline an employee for out of hours conduct, where that conduct results in the employee being charged with or convicted of a criminal offence. Numerous decisions have given rise to the view that, for a sufficient nexus to exist between an employee's conduct outside of work and the employment relationship, it is a requirement that the conduct: when viewed objectively, is likely to cause serious damage to the relationship between the employee and employer; damages the employer's interests; or is incompatible with the employee's duties as an employee (see for example, Rose v Telstra Corporation Ltd Print (unreported, AIRC, Ross VP, 4 December 1998), Q , and Farquharson v Qantas Airways Ltd (2006) 155 IR 22, 30). This principle was clearly expressed by Saindl J in Hussein v Westpac Banking Corporation (1995) 59 IR 103, where he stated: " a conviction on a drink-driving charge which occurred outside work hours would not be relevant to the employment of many people. However it would be of critical relevance to a truck driver or taxi driver. It seems to me that an appropriate test is whether or not the conduct has a relevant connection to the employment." What factors are relevant to determining whether there is a relevant connection? In deciding whether a relevant connection exists between the employee's conduct and the employment relationship, the courts have previously had regard to a number of factors including: The nature of the particular criminal offence with which the employee is charged. For example: Is the offence a violent offence? Does the offence involve elements of dishonesty that might impact on the employer's ability to trust the employee to perform his or her duties? Does the offence otherwise impact on the performance of the employee's duties? The position that the employee occupies within the employer's business and the extent to which the conduct can be said to impact on his or her employment. The decision in Deeth v Milly Hill Pty Ltd [2015] FWC 6422 is consistent with a line of decisions of the Fair Work Commission, its predecessor and the Courts in relation to the limitations on an employer's right to The capacity for the charges or the conviction to cause reputational damage to the employer, including having regard to: Ashurst Employment Alert 5 November

4 the size and nature of the employer's business; any media coverage of the offence; whether the employer's property was used in the commission of the offence; and whether the employee can readily be identified as an employee of the employer. Lessons for employers Ultimately, whether a relevant connection exists between the out of hours criminal conduct and the employee's employment will depend on the particular facts and an analysis of the factors set out above. However, in all cases, it is critical that employers conduct their own investigation into the circumstances of the offence so that they have reasonable grounds to determine if there is a valid reason for dismissal. This is especially the case where the employer is not a 'small business employer' as defined by Fair Work Act, as the employer will be held to a higher standard. Employers should also adopt a cautious approach where the employee has simply been charged with a criminal offence and the conduct that is the subject of the criminal offence has not yet been proved. However, employers are not required to assess an employee's conduct using the criminal standard of beyond reasonable doubt. Finally, employers should assess whether their policies, procedures and template contracts adequately deal with the potential for termination of employment in circumstances where the employee has been charged with or convicted of an offence, and where the charge or conviction results in the employee being unable to perform his or her duties. MAKING THE CASE: Insights from Geoff Giudice Where an employer dismisses an employee for out of hours conduct there must be a relevant connection between the conduct and the employer's business. If the conduct involves violence of a serious nature, termination will usually be justified. When the unfair dismissal application is heard before the criminal proceedings have been completed, reliance on the out of hours conduct must necessarily be indirect. Deeth is a case of that type. While the employee had been charged with being an accessory to murder and released on bail, nothing had been proven against him at the time of termination. Added to that, the employer did not rely on the allegation of criminal conduct as such; in fact it did not even investigate the circumstances relevant to the criminal charge. Nevertheless, the Commission found that there was a valid reason for the dismissal. It relied mainly on the violent nature of the offence the employee had been charged with, the nature of the employee's work, the fact the employment was located in a country town and the significant publicity that had been given to the murder and the surrounding events. Although the Commission also took into account some behaviour of a threatening nature the employee had engaged in at work, it attached a great deal of weight to the mere fact the employee had been charged with a violent offence and the consequent impact on staff and customers. Ashurst Employment Alert 5 November

5 Authors Marie-Claire Foley Partner Perth T: E: marie-claire.foley@ashurst.com Geoffrey Giudice Consultant Melbourne T: E: geoffrey.giudice@ashurst.com Caitlyn Ryan Senior Associate Brisbane T: E: caitlyn.ryan@ashurst.com Employment contacts Brisbane James Hall, Ian Humphreys, Vince Rogers T: Canberra Jon Lovell, Paul Vane-Tempest T: Melbourne Steven Amendola, Richard Bunting, Jane Harvey T: Perth Marie-Claire Foley, Rob Lilburne T: Sydney Lea Constantine, Jennie Mansfield, Helen McKenzie, Adrian Morris, Stephen Nettleton, Stephen Woodbury T: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transact ions. For more information please contact us at aus.marketing@ashurst.com. Ashurst Australia (ABN ) is a general partnership constituted under the laws of the Australian Capital Territory and is part of the Ashurst Group. Further details about Ashurst can be found at Ashurst Australia No part of this publication may be reproduced by any process without prior written permission from Ashurst. Enquiries may be ed to aus.marketing@ashurst.com. Ref: