An employer has the right to summarily dismiss (instantly, without notice) an employee who has committed an act of serious misconduct.

The ability to summarily dismiss an employee is available in relation to all employees including permanent full-time, part-time and fixed term employees. The concept of summary dismissal is less relevant to true casuals, who do not work on a regular and systematic basis and do not have an expectation of ongoing work.

Each shift that is performed by a true casual employee is considered a separate and distinct engagement with no guarantee of ongoing work beyond that shift. Employers may simply choose not to re-engage that staff member again if they are found to have engaged in serious misconduct.

Serious misconduct generally constitutes an act by an employee so serious that it has the effect of striking at the heart of the employment relationship so as to sever it irrevocably.

There is no fixed rule of law defining what acts constitute serious misconduct. The meaning of the term stems from the common law (historical judgements). A comprehensive understanding and approach to instances of serious misconduct will protect employers against any potential claims, such as unfair dismissal, that employees may make.

National system employers

National system employers are required to adhere to the Fair Work Regulations 2009 (Cth) (Regulations), which provide some guidance as to what acts may constitute serious misconduct. The Regulations outlines two criteria which must be satisfied in the first instance:

• wilful or deliberate behaviour that is inconsistent with the continuation of employment; and
• conduct causing serious and imminent risk to the:
  • 1. health or safety of a person; or
    2. reputation, viability or profitability of the employer’s business.

The Regulations also provide specific examples of serious misconduct including:

• theft
• fraud
• assault
• being intoxicated at work
• refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.

It is important to note that in each instance of suspected serious misconduct, employers must consider the facts on a case by case basis. For example, an employee intoxicated by alcohol at work following a work function at which the organisation provided alcohol, insufficient food, and has no drug and alcohol policy, would not generally warrant instant dismissal.

State system employers

The Industrial Relations Act 1979 (WA), which applies to employers in the state industrial relations system, does not define serious misconduct.

Understanding serious misconduct

To ascertain whether the conduct is of a serious nature, it is necessary to identify the work and terms that the parties agreed upon (both explicit and implicit). The employee must have repudiated their contractual obligations for their action to be considered serious misconduct.

The repudiation may take the form of any of the following (this list is not exhaustive):

• stealing from or defrauding the employer
• fighting or inciting violence in the workplace
• providing confidential information to a competitor
• sexually harassing a co-worker, client or supplier
• wilfully disobeying a lawful order of the employer
• attending work intoxicated by illicit drugs and/ or alcohol
• having a criminal offence(s) related to the inherent requirements of the position.

 Can conduct outside of work be serious misconduct?

Conduct outside of work may constitute serious misconduct where there is a connection between work and the conduct. For example, where an employee posts inappropriate comments on a social networking site outside of work hours that identifies them as being associated with the company and has, or has potential to, have negative impact on the organisation due to clients and other employees accessing that post.*

It is always important for employers to consider the consequences of organisation supported or sponsored events. Additionally, policies and training should be sufficiently comprehensive to deal with behaviour that may occur out of work that can impact on work. Where insufficient policies and training are provided, or there is a failure to take appropriate steps to ensure the safety of all workers at work sponsored or supported events, any resulting disciplinary action or termination may result in a claim that could be difficult to defend.

What other factors are considered?

All the surrounding circumstances must be considered before an incident can be judged as serious misconduct.

Breach of policies

Having clear policies in place, that employees have been trained and educated about, may justify termination of employment in circumstances where employees engage in a serious breach of those policies.

Delaying action

Upon becoming aware of the serious misconduct, employers should act quickly, as delaying action suggests to the employee and others in the workplace that the behaviour does not constitute serious misconduct. Additionally, if the employment is ultimately terminated and an unfair dismissal claim lodged, the delay by the employer in dealing with the matter may result in the relevant industrial tribunal determining that the conduct was not serious in nature.

Consistency

Industrial tribunals will also consider an employer’s consistency in approach to similar matters (i.e. how the employer has treated similar cases involving other employees). An inconsistent approach to discipline and termination for acts of serious misconduct may suggest unfairness.

The particular employee

A single incident of misconduct may not in itself constitute serious misconduct especially in cases of a high-performing, long-serving employee.

The degree of impact

Another key consideration for employers, is the impact of the conduct relative to the size of the business. For example, an employee stealing $1000 is more likely to seriously impact a small business’ viability when compared to a larger business.

Steps employers should take where serious misconduct is suspected

Conducting an investigation

A comprehensive investigation must be undertaken as soon as the suspected misconduct is discovered. The investigation should include the gathering of all evidence including written witness statements, emails, surveillance footage etc. to present to the employee. The employee should be provided with an opportunity to respond to the allegations and the response should be properly considered by the employer.

For further information on workplace investigations, please refer to our information sheet titled “How to Conduct Workplace Investigations.”

Suspending an employee

Depending on the seriousness of the alleged conduct, it may be necessary to suspend your employee. Supension involves directing the employee not to return to work until requested to do so by management and/or their supervisor.

There is no common law right to suspend an employee. This is because, while under an investigation, employees are entitled to the presumption of innocence. As such, during a period of suspension an employer is required to continue to pay their employee. Suspension without pay may constitute a serious breach of the employment contract on the employer’s behalf. Suspension without pay may be possible in some situations. For example, where an employee has exceeded the organisation’s expected Blood Alcohol Content reading which renders them unfit for duties and where they have exhausted their entitlement to paid personal leave.

Fact-finding

Ultimately the employer needs to conclude whether the allegations are substantiated or unsubstantiated. To conclude that the allegations are substantiated the employer must be satisfied on the balance of probabilities that the alleged conduct did in fact occur. Importantly, an unsubstantiated allegation does not necessarily indicate that the conduct did not occur. Rather, it means that there was not enough information to arrive at a conclusion.

Serious misconduct or not?

Whilst the employer may find that the alleged conduct occurred, it may not be serious enough to warrant summary dismissal. Other disciplinary action may be appropriate includes but is not limited to; transferring the employee to another location, demotion or a written warning.

Evidentiary considerations

An employer bears the onus of demonstrating it has grounds to terminate an employee for serious misconduct. The decision to terminate in this instance should always be based on information obtained through a thorough investigation that establishes, on the balance of probability that the employee engaged in serious misconduct. Conversely, a termination that does not involve an allegation that the employee engaged in serious misconduct, directs the employee to satisfy a tribunal or court that they were terminated in circumstances which were unfair.

Importantly, if after the termination, evidence of serious misconduct comes to light, the employer may seek to use the evidence to further substantiate and justify the reasons for termination.

Risks for employers

If an employer terminates on the grounds of serious misconduct an employee may lodge an unfair dismissal claim against the business.

National system employers

Where an employee successfully argues that they were unfairly dismissed, the Fair Work Commission (FWC) may order reinstatement as the primary remedy or redeployment to an associated entity. These orders may include restoration of lost pay and other employment entitlements, in order to maintain the continuity of service with the employer.

The second remedy is compensation. The maximum amount of compensation that may be ordered by the FWC is equivalent to six months’ worth of the employee’s wages, (i.e. calculated with reference to the employee’s wages immediately prior to the dismissal) or half of the prescribed high-income salary, whichever is the lesser amount. The high-income salary cap for national system employees is $145,400 from 1 July 2018 (indexed annually).

For further information on the categories of employees who are eligible to make an unfair dismissal claim see CCI’s Information Sheet titled ‘Unfair Dismissals – National System Employers.

State system employers

The Western Australian Industrial Relations Commission may order reinstatement or compensation. Back payment that may be ordered is not capped. For the purposes of eligibility to claim unfair dismissal in the state system, the employee must not have been earning in excess of the salary cap immediately prior to termination, which is currently $162,990 (from July 1, 2018, indexed annually).

Payments upon termination

Notice

If after an investigation is conducted, the employer concludes that the employee has engaged in serious misconduct, the employer should dismiss the employee immediately without notice. There is no obligation to pay the employee in lieu of working out a notice period, under these circumstances. Additionally, the employer must not ask the employee to work out a notice period or this will contradict the concept of summary dismissal.

Wages

An employee who is dismissed for serious misconduct is entitled to be paid for their wages up until the time of dismissal. This will include any period when the employee was suspended, pending an outcome to the investigation.

Long service leave

The final termination payment may also include untaken long service leave, however, any pro rata long service leave is forfeited.

Annual leave

National system employers are not permitted to withhold accrued annual leave on termination on the grounds of serious misconduct. This means that employees are entitled to be paid out all annual leave (including annual leave loading, if applicable) at the time of the termination.

Conversely, awards and agreements covering employers in the state system generally preclude the payment of annual leave and annual leave loading (if applicable) on termination for serious misconduct. It is important to always check the relevant industrial instrument to ensure it provides the ability to withhold annual leave in the case of summary dismissal before doing so.

Our Employee Relations Advice Centre can assist in confirming whether such a provision exists in the relevant industrial instrument.

Employers requiring further information about summary dismissal should contact CCI’s Employee Relations Advice Centre on (08) 9365 7660, email [email protected] or visit CCI’s website at www.cciwa.com.