Are You Serious? Serious Misconduct and Why It’s Important to Get It Right

Working as a business operator, you always want the best employees at your side. A good team is often critical for the ongoing success of a business.

However, it's pretty much guaranteed that at some point, one or more member of staff will drop the ball, whether it's through carelessness, callousness, or even just having a bad day. Whilst in most cases, a standard disciplinary process and a warning can put any missteps to bed, occasionally employers may be faced with a situation where an employee knowingly, recklessly or even deliberately does something so serious that they face the possibility of termination on the basis of serious misconduct.

When that happens, it is vital that business owners get their process right. Long gone are the days of 'sacking on the spot'. In fact, recent case law highlights that it's not enough to know some actions or behaviours warrant termination: business owners need to be able to prove it.

Serious Misconduct, just what is it?

Serious misconduct is specifically defined under the Fair Work Regulations into one of two categories:

1. Wilful and deliberate conduct inconsistent with the continuation of employment; or
2. Conduct that causes serious and imminent risk to:
   1. The reputation
   2. Viability, or
   3. Profitability of a business

What amounts to serious misconduct can vary. The regulations provide a few examples of conduct that fits this mould. This includes:

• Assault
• Intoxication at work (drugs or alcohol)
• Theft
• Fraud (or other serious misleading forms of conduct)
• Sexual harassment
• Refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract

Recent case law highlights the expanding nature of this definition. Examples such as deliberately extending hours (Jackie Du v Aus Post), out-of-hours conduct (Lattouf v ABC) and other cases highlight this expansion.

Importantly: Unlike standard termination, a finding of serious misconduct may allow an employer to terminate employment without requiring the employee to work a notice period or paying notice in lieu.

Proving Serious Misconduct

However, employers must be careful when alleging and actioning serious misconduct, as the implications of terminating (or even issuing a first and final warning) may be action in the Fair Work Commission if an employer cannot successfully establish the serious nature of the conduct.

Whilst it is easy for employers to assume the conduct is serious (i.e. an employee is rude to the boss, refuses to do a job, or lies on a document), the onus lies on the employer, not the employee, to establish that the conduct is serious.

Broadly known as the Briginshaw principle, the employer needs to supply evidence to establish, to a civil standard (balance of probabilities), that the action/conduct:

• Is serious enough that it is inconsistent with continued employment or has implications for safety, reputation, business viability or profitability
• Is something the employee knew to be serious in one or more of these ways (or was reckless as to this); and
• Had an impact or consequences that are relevant to the alleged breach and potential outcome

It is vitally important that an employer establish the facts through an appropriate disciplinary process (see below).

Why is this Required?

1. Simply assuming that the offence will be regarded as serious because 'it's obvious' won't suffice, and employers need to do the work to ensure that this is provable.
2. Similarly, termination without a process of any kind (even in straightforward matters) can be challenged, especially since it can result in loss of entitlements (i.e. notice and potentially other entitlements).

Impact of the Small Business Code: Even where a business is a small business employer (covered by the Small Business Fair Dismissal Code), and where the conduct is objectively serious (for example, a physical assault), the employer still needs to show that it held a reasonable belief, on reasonable grounds, that the employee engaged in conduct sufficiently serious to justify immediate dismissal. Taking the relevant steps is key, and terminating without sufficient grounds may undermine the process, even where you believe it to be justified.

The Proper Process for Serious Misconduct

Below is a step-by-step guide to undertaking a serious misconduct disciplinary process:

1. Do NOT AUTOMATICALLY TERMINATE
   1. Whilst the term 'summary dismissal' is often used in such processes, this refers to termination without the notice period applied in standard employer-directed terminations. Substantiating serious misconduct may allow dismissal without notice, but it is important that a business follows a fair process first. If challenged, the employer may need to establish the basis for the decision.
2. Suspension from Duties
   1. Whilst some actions may warrant immediate suspension from duties (i.e. a violent incident), it is important that you back this up in writing.
   2. You may have to pay: In most cases, an employer-directed suspension pending an investigation should be on pay unless a lawful basis exists for unpaid suspension. Check the applicable award, agreement, contract and circumstances before suspending without pay.
3. The Lead Up Process
   1. As with all disciplinary processes, an appropriately drafted invitation to a disciplinary meeting should be provided, and should contain:
      1. A summary of the allegation/s
      2. The relevant breaches of law and/or policy
      3. The potential outcomes (including summary dismissal)
      4. The opportunity to respond during the meeting; and
      5. A reasonable opportunity to have a support person present
4. The Disciplinary Meeting
   1. During the meeting, an employer should establish:
      1. That the employee is aware of the allegation
      2. That they understand the seriousness of the allegation
      3. That they understand the potential impact on the business and/or employees
   2. The employee needs to be given a reasonable opportunity to respond, and consideration needs to be given to their answer.
   3. In most cases, an outcome shouldn't be decided during the meeting, and an employer should review all evidence before delivering the final decision.
   4. Most importantly, notes should be taken, as these may be required should the employee wish to challenge any final outcomes or decisions.
5. The Outcome
   1. Not every serious misconduct meeting will result in summary dismissal. Depending on the evidence and circumstances, an employee:
      1. May be summarily dismissed without notice or payment in lieu of notice where serious misconduct is substantiated and the legal threshold is met
      2. May be terminated with notice or payment in lieu of notice where the conduct warrants dismissal but does not meet the threshold for summary dismissal
      3. May be given a first and final written warning
      4. May be subject to further investigation or additional questions based on their responses; or
      5. May not receive any further disciplinary action if the evidence is insufficient to substantiate the allegations
   2. Employers also need to be aware that:
      1. Decisions made for one employee may be taken into account if the same or similar conduct is undertaken by another employee (precedent)
      2. Additional actions may be required if misconduct is substantiated but termination is not the outcome (such as changes to departments or shift schedules, where lawful and appropriate)

Key Takeaways

Serious misconduct should never be taken lightly. The consequences of getting the determination and/or the process wrong can be significant for your business.

What about Christmas shutdowns?

The approaching Christmas period presents less of a challenge than other years, as for many businesses, a close down of 3 days between Christmas and New Year is probable, with annual leave required on Tuesday 29, Wednesday 30, and Thursday 31 December 2026.

In the week before but more likely the week after Christmas and New Year, employees are likely to want to have extra time off to extend their holidays which will match reduced volume of work.

Automotive businesses that close completely or maintain limited operations, can direct employees to take annual leave.

MTA NSW members can contact our Employment Relations and Legal Teams on: [email protected] or phone us on 02 9016 9000.

For businesses that are not currently members, our Membership Team can provide more information about MTA NSW and MTA ACT membership and the support available to members.