29 January, 2016
Toll Holdings Limited t/a Toll Transport, Toll Transport Pty Ltd t/a Toll Priority v Joseph Johnpulle [2016] FWCFB 108 (11 January 2016)
WHAT YOU NEED TO KNOW
- A Full Bench of the Fair Work Commission has recently held that in unfair dismissal proceedings the Commission can consider an employee's past misconduct when deciding whether the employee's dismissal was "harsh, unjust or unreasonable". This was held to be the case even where the past misconduct was managed informally and so did not result in disciplinary action.
- The decision of Toll Holdings Limited t/a Toll Transport, Toll Transport Pty Ltd t/a Toll Priority v Joseph Johnpulle [2016] FWCFB 108 makes clear that when dismissing an employee by relying on past misconduct, an employer may only have a valid reason for dismissal if the employee was formally disciplined (eg warned) for that conduct. An employer that condones misconduct (including by failing to deal with it properly and formally) may not later be able to rely on that misconduct as a valid reason for dismissing the employee.
- However, the Full Bench held that the Commission must still consider an employee's past misconduct more generally when considering whether that employee's dismissal was "harsh, unjust or unreasonable".
- The decision highlights that there are important differences between managing alleged employee misconduct informally, or formally. Conduct which is dealt with properly and efficiently by formal processes, such as investigation, and (if merited) disciplinary action, is more likely to be a valid reason for later dismissing the employee.
WHAT YOU NEED TO DO
- Train all employees, supervisors and managers about appropriate workplace behaviours and apply standards of behaviour consistently to all employees.
- Have in place formal and informal processes to deal with allegations of misconduct and ensure that the appropriate process is applied in each instance. In particular, remember that there may be limited or no opportunity to take disciplinary action later that is based on conduct that has only been dealt with informally.
- Properly document both informal and formal processes. Even where an employer may not be able to rely on outcomes from an informal process to form a valid reason for termination, the Commission may still consider the outcomes from an informal process.
- Draft written warnings carefully so as not to limit your ability to be able to rely on them subsequently, when appropriate. For example, do not include a date by which a warning expires, or is to be removed from the employee's file, and do warn about possible dismissal for "further inappropriate conduct", rather than for a repeat of the same conduct.
How often have you dealt with a "repeat offender"? Most managers will be familiar with the scenario in which an employee is being investigated for alleged misconduct and, during the investigation, it transpires that the employee has a history of similar bad behaviour.
Where an employee is a "repeat offender", can you rely on past misconduct or a pattern of behaviour to dismiss the employee? If so, how far back can you go to find examples of misconduct?
Considering past misconduct
In the recent decision of Toll Holdings Limited t/a Toll Transport, Toll Transport Pty Ltd t/a Toll Priority v Joseph Johnpulle [2016] FWCFB 108, a Full Bench of the Commission overturned a decision to reinstate an employee. The Commissioner at first instance had found the employee was unfairly dismissed for repeated and escalating misconduct.
The Full Bench's decision is practical and pragmatic and provides some comfort to employers faced with the difficult task of managing a pattern of inappropriate behaviour by an employee. However, the decision is also a reminder that employers must be vigilant and consistent in investigating and managing misconduct, lest they be found to have condoned the behaviour through inaction.
First instance decision – unfair to consider past misconduct
The dismissal of the employee in the Johnpulle decision arose out of comments he made to another employee in January 2015. Broadly speaking, the employee asked provocative questions and made comments about religion, war and politics in the Middle East to a co-worker of Afghani heritage.
When the employer commenced an investigation into the incident, it became clear that the employee had made similar comments on three occasions during 2014. Those past incidents, as well as the January 2015 incident, were put as allegations to the employee as part of the investigation process. The employee had a chance to respond to each allegation. Ultimately, the investigation found all four allegations were substantiated. The employer dismissed the employee on the basis that he had engaged in a pattern of unacceptable behaviour.
At first instance, Commissioner Riordan found that the employer had a valid reason for dismissing the employee because he had made racist, sectarian and inappropriate comments in January 2015. The comments were in breach of the employer's policy and constituted serious misconduct.
However, taking into account a variety of other matters which he considered relevant, the Commissioner found that the dismissal was unfair, including, because:
- the investigation process was flawed because of a lack of investigation (despite the involvement of a former FWC Commissioner);
- there was evidence of a "hostile work environment" and ongoing interpersonal conflict between the two employees, including complaints against both. The fact that only one employee was dismissed suggested to the Commissioner that there was inconsistency in the employer's treatment of its employees, and procedural unfairness to the employee who was dismissed;
- there was no evidence that there had actually been a confrontation between the employees in January 2015. Also, the employee to whom the inappropriate comments were made went back to work with the alleged perpetrator without issue; and
- it was unfair for the employer to rely on the 2014 misconduct as a reason for dismissal because the employee had already (at most) been informally and verbally warned in relation to that misconduct.
Commissioner Riordan ordered that the employee be reinstated, with continuity of service but with loss of three weeks' pay to reflect his misconduct. He also ordered that both the dismissed employee and the other employee be issued with formal warnings which would remain on their file.
Full Bench decision – past misconduct is relevant
The Full Bench overturned Commissioner Riordan's decision, finding that the Commissioner had made three significant errors. The Full Bench remitted the matter to a different commissioner for re-hearing.
Relevantly, the first error was that the Commissioner had failed to take into account the employee's pattern of misconduct, which the
Full Bench found "could not fail to be a relevant matter" in relation to the overall fairness or unfairness of the decision and the remedy to be awarded (if any).
Commissioner Riordan found that each of the three instances of past misconduct could not constitute a valid reason for dismissal. This was because each had been dealt with only informally, and the employee had not been formally warned or disciplined in relation to any of them.
The Full Bench agreed that by failing to deal with each instance of misconduct as it occurred, an employer could lose its common law right to summarily dismiss the employee in relation to that instance of misconduct. It would therefore be difficult to conclude that the conduct was a valid reason for termination of employment. The Full Bench agreed with the Commissioner's finding that none of the instances of past misconduct constituted a valid reason for dismissal under the Fair Work Act 2009 (Cth).
(By contrast, in the recent decision of Jamin Horner v Kailis Bros Pty Ltd [2016] FWC 145 the Commission found that it was not unfair to dismiss an employee for swearing at his manager where he had previously done so and been warned that a repeat of that behaviour may lead to termination of his employment).
However, the Full Bench found that although in this case the instances of past misconduct were not a valid reason for the employer's decision, that did not prevent the Commission from considering the past instances in the context of the more general question of whether the dismissal was "harsh, unjust or unreasonable". The Full Bench found it relevant that each of the three allegations of past misconduct had been substantiated, and that the employee had agreed that he would not make such comments again.
When can an employer consider past misconduct?
The Johnpulle decision is an example of circumstances where there was a difference between:
- an employer taking into account past conduct in deciding whether there is a valid reason to dismiss an employee; and
- the Commission taking into account that same past conduct in deciding in unfair dismissal proceedings whether the dismissal was harsh, unjust or unfair.
An employer's consideration of past conduct to form a valid reason for termination may not be permitted if the employee was not properly warned or disciplined in relation to that conduct. In contrast, the Commission's consideration of that same conduct is likely to be required where the past conduct is relevant to an overall assessment of whether the dismissal was harsh, unjust or unreasonable.
While the Full Bench found that it was open to the Commission to consider that past misconduct when it came to look more broadly at the fairness of the dismissal, they agreed with the Commissioner that in the circumstances the employer could not treat the past misconduct for which the employee had not been disciplined as a "valid reason" for dismissal.
Disciplinary action requires a formal process
As in the Johnpulle decision, for an employer to rely on past misconduct when dismissing an employee (including for a pattern of behaviour) it is generally necessary that the misconduct be properly dealt with at, or soon after, the time it occurred. This usually requires more than a "shop floor resolution" (as the Commissioner described the management of the incidents in the Johnpulle decision).
If an employee is to be dismissed for ongoing and escalating misconduct, that is best supported by a consistent history of disciplinary action, not just informal outcomes. For an employer to be well placed to claim that an employee's pattern of misconduct is serious enough to justify dismissal, the employer should foreshadow this to the employee by investigating and managing each instance of the alleged misconduct according to a proper process.
Employers should have in place formal and informal processes to deal with allegations of misconduct and ensure that they apply the appropriate process in each instance. In particular, remember that there may be limited or no opportunity to take disciplinary action later that is based on conduct that has only been dealt with informally.
Employers should properly document both informal and formal procedures. As shown in the Johnpulle decision, even though an employer may not be able to rely on outcomes from an informal process to form a valid reason for termination, the Commission may still consider those outcomes when determining overall fairness of the termination.
Relying on warnings for previous misconduct
The more robust and timely an employer's investigative and disciplinary process is, the more likely it is that the employer will be able to rely on warnings given under the process to justify subsequent dismissal for similar misconduct.
To increase the utility and life span of a written warning, draft the warning carefully so as not to limit the employer's ability to be able to rely on it subsequently, when appropriate. For example, do not include a date by which a warning expires, or is to be removed from the employee's file, and do warn about possible dismissal for "further inappropriate conduct", rather than for a repeat of the same conduct.
MAKING THE CASE: Insights from Geoff Giudice
While circumstances alter cases, one lesson to be learned from Toll Holdings v Johnpulle is that where verbal abuse or other such conduct comes to management's attention, it is important to properly investigate it and, if satisfied it occurred, to take some disciplinary action. Failure to do so might mean that an employer may not be permitted to rely on that conduct in subsequent unfair termination proceedings either as constituting a valid reason for dismissal, or at all.
For further information, please contact:
Marie-Claire Foley, Partner, Ashurst
marie-claire.foley@ashurst.com
