Justitia Update Newsletter – 18 March 2015 Edition

Justitia Update
18 March 2015
This Justitia Update outlines recent important decisions affecting the
employment and industrial relations landscape.
Impact of Plaintiff delay at VCAT
If a long delay occurs between a dismissal which is alleged to be unfair
and a plaintiff’s application for reinstatement or compensation, will the
application be struck out? This depends on the jurisdiction where the
application to strike out a claim is brought, and a number of factors
outlined recently by the Victorian Civil and Administrative Tribunal’s
(‘VCAT’) Senior Member Ian Proctor in the case of Kramersh v IPD
Education Limited. The case suggests that although VCAT can order
summary dismissal on the ground of delay, employers can never
assume this will happen, especially where it is difficult to show
significant prejudice to the employer resulting from the delay.
Mr Kramersh was an employee of IPD Education Limited. He took leave
in November 2011 due to work-related stress in the context of alleged
bullying and harassment. Six months later he embarked on a workers’
compensation claim, which was rejected another two months later. Mr
Kramersh disputed the rejection, and the claim was subsequently
resolved in 2014 by agreement between the parties. Mr Kramersh’s
lawyer was represented in those proceedings.
On 14 August 2012, after the initial rejection of Mr Kramersh’s
WorkCover claim, IPD wrote to him asking whether he intended to
return to work, and if so, requesting a medical certificate stating he
was capable of performing his usual duties. IPD indicated that in the
absence of a response, IPD would assume he did not intend to return
to work, and Mr Kramersh’s employment would be terminated.
On 22 August 2012, Mr Kramersh emailed IPD stating he intended to
return to work when well enough to do so, and offering to continue to
send the company WorkCover certificates of capacity. IPD responded
by email indicating that it and their insurer did not believe Mr Kramersh
was suffering any injury compensable under WorkCover, and that Mr
Kramersh’s employment would be terminated if he did not respond to
its earlier letter. Mr Kramersh replied to this email on the same day,
stating that he was unable to name the date he could return to work
due to his medical condition. He said his ‘firm preference’ was for his
employment to be maintained until he could return. He also indicated
that he assumed that if his employment was terminated, he would be
paid four weeks in lieu of notice.
On 3 September 2012, IPD terminated Mr Kramersh’s employment. Mr
Kramersh did not initially contest this. Meanwhile, the WorkCover claim
continued. This matter was settled between the parties in March 2014,
some eighteen months after Mr Kramersh’s termination of employment.
On 20 March, once the WorkCover claim was resolved, Mr Kramersh
told IPD that since December 2012 he’d had capacity to work two
days per week, and would have done so if his employment was not
terminated. He stated his belief that his dismissal was unlawful due to
discrimination, and sought a response by 28 March 2014.
A week later, Mr Kramersh lodged a VCAT application claiming his
dismissal was unlawfully discriminatory under the Equal Opportunity Act
2010 (Vic), and requesting reinstatement and compensation. It did not
go unnoticed that after the termination, Mr Kramersh had waited
eighteen months before either raising the matter with IPD or making an
application to VCAT. IPD submitted that such delay should cause VCAT
to summarily dismiss the case, which would mean it would be struck out
without being fully heard.
The IPD pointed to two sections of the VCAT Act by which VCAT is
authorised to order such summary dismissal. Firstly, it noted VCAT is
entitled to order summary dismissal for want of prosecution under
section 76. Secondly, it pointed to section 75(1)(b) of the VCAT Act,
which entitles the tribunal to strike out applications that are an abuse
of process.
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In support of its case for summary dismissal for want of prosecution, IPD
pointed to clause 18 of Schedule 1 of the VCAT Act, which entitles IPD
to use section 76 to strike out claims where the alleged contravention
happened more than twelve months prior to the making of the
application. IPD argued this clause imposes a ‘de facto’ twelve month
time limit on applications, meaning that the eighteen month delay
caused by Mr Kramersh must be automatically struck out.
In addition to this argument, IPD argued that the tribunal should
exercise its power of summary dismissal under section 76 because of
the severe prejudice the delay had caused the organisation. It was
submitted that the memories of witnesses would be negatively
affected by the passage of time, rendering evidence inaccurate.
IPD also noted that the delay would increase its detriment should Mr
Kramersh’s application be successful. Following Mr Kramersh’s
dismissal, IPD had employed a new employee to take over his role. Mr
Kramersh responded to this submission by arguing that due to IPD’s size
and resources, it should be able to find an alternative position for him
even if his previous job had been filled.
IPD ultimately relied on these same arguments about prejudice to insist
that the delay constituted an abuse of process and therefore justified
dismissal under s 75(1)(b). It also noted that it was not responsible for
the delay, and argued that to allow the application to proceed
despite the delay would frustrate the public interest, which favours the
swift resolution of disputes.
In assessing the question of whether the delay constituted abuse of
process, Senior Member Proctor affirmed the relevance of Garcia v
Miles and Anor. In this case, Senior Member Mackenzie had
determined the primary consideration to be ‘the interests of justice’.
These can be measured, Senior Member Proctor held, by weighing the
same factors identified in Garcia, namely ‘whether the delay is
inordinate and unreasonable or inexcusable, any explanation for the
delay and its adequacy, the nature of the proceeding, whether and
to what extent the respondent was responsible for the delay, prejudice
to the respondent if the proceeding were to continue, the public
interest, and the effect of the delay on the quality of justice’.
In balancing these considerations, Senior Member Proctor treated Mr
Kramersh’s application for reinstatement separately from his
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application for monetary compensation. The reasons for the decision
were largely given without stipulating whether they applied to the
application for strike out under section 75 or section 76.
Senior Member Proctor granted the summary dismissal insofar as Mr
Kramersh’s application for reinstatement was concerned. The eighteen
month delay was deemed ‘inordinate’, especially as Mr Kramersh had
not told IPD about his planned application, and IPD had arranged its
affairs accordingly.
On the other hand, Senior Member Proctor refused IDM’s application
for dismissal of the entire proceeding, holding that the application for
monetary compensation could go ahead. A key reason given for this
was that ‘in the context of litigation, an 18 month delay is unfortunately
not unusual’. Although Senior Member Proctor agreed that the quality
of justice may be affected by delay due to witnesses’ faded
memories, ‘the reality is that witnesses commonly give evidence about
events some time ago’.
Senior Member Proctor did not clearly explain whether weight was
given to Mr Kramersh’s reasons for the delay, either in the context of
the application for reinstatement or for monetary compensation. Mr
Kramersh had sought to excuse his delay on the basis that it would
have been too stressful for him to make the application under the
Equal Opportunity Act until after his WorkCover claim was resolved. No
weight was given to a letter provided by his GP confirming that he
would have been mentally unable to cope with a second court case,
as the letter was brief, lacked reasoning, and the GP was not present
for cross-examination. It was unclear whether Mr Kramersh’s reasons
were accepted by Senior Member Proctor despite this, or what role
they played in the decision.
It was relevant that IPD was not responsible for the delay, but this was
not held to be determinative. A more essential factor, it seems, is the
level of prejudice caused by the delay, which in this case was ‘not
sufficient to justify dismissal of the monetary claim’.
Although Senior Member Proctor recognised that there is a public
interest in disputes being settled as quickly as possible, this did not
change the finding that the delay in question was not material to the
monetary claim.
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Senior Member Proctor also rejected the submission that Clause 18
imposes a ‘de facto’ twelve month time limit. It was held that the
clause, in combination with section 76, is intended to give VCAT
discretion to order summary dismissal in cases of delay, without
mandating that this occur.
Kramersh v IPD Education Limited (Human Rights) [2014] VCAT 1439 (13 November 2014)
Lessons for Employers
If, following a dismissal, an employee has remained silent for eighteen
months or longer before applying for reinstatement, VCAT may
summarily dismiss the application for reinstatement on the basis that
the employee’s delay has caused undue prejudice to the employer.
This outcome is more likely if the employer has filled the employee’s
former position in the meantime.
On the other hand, delays of eighteen months or longer may not
prevent an employee from being able to claim compensation at
VCAT. Applications for summary dismissal will hinge on a series of
factors such as the length of delay, the reasons behind it, whether the
delay was caused by the employer, and the level of prejudice the
employer has suffered as a result of the delay.
In the case of an eighteen month delay, it may be difficult for an
employer to demonstrate that the lapse in time has caused them
sufficient prejudice to justify summary dismissal of a compensation
claim. This is because litigation commonly involves delays of this
duration.
IBAC warns against corrupt recruitment
In the wake of a recent IBAC forum featuring speakers from IBAC, the
Victorian Ombudsman and the Victorian Public Sector Commission,
we are reminded how recruitment processes can be a key locus of
corruption and how human resource practitioners must be vigilant in
monitoring them.
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Addressing human resource practitioners and managers from the
public service, IBAC CEO Alistair Maclean noted that in the course of
IBAC’s investigations, several managers were found to have failed to
conduct proper background checks on candidates in the course of
recruitment. According to Mr Maclean, such poor management and
supervision can contribute to misconduct and corruption.
A key theme covered in the forum was how public sector employers
can avoid corruption in both recruitment and other areas by building
reporting cultures. IBAC’s Principal Advisor Geoff Crawford identified
HR personnel as vital to this effort, and stated that measures must be
taken to ensure managers can supervise effectively. This should involve
developing strategies for identifying low-level fraudulent behaviour,
and managing its impact.
IBAC’s website provides a link to a recent research report it
commissioned entitled ‘A review of integrity frameworks in Victorian
public sector agencies’, November 2014.
The focus on the corruption risk posed by recruitment aligns closely with
messages from the Victorian Ombudsman George Brouwer, who
released a report entitled ‘Conflict of Interest in the Victorian Public
Sector – ongoing concerns’ in March 2014. Like the recent forum and
IBAC commissioned research, that report identified recruitment as a
major risk area for conflicts of interest.
Lessons for Employers
Ensure that your organisation has appropriate recruitment policies and
procedures. These should clearly state who is responsible for managing
the corruption risks that accompany recruitment. They should also
explain the reporting system or complaint mechanism for bringing
corruption to the attention of senior management.
Ensure that senior HR personnel have received training regarding
appropriate recruitment practices, including strategies for identifying
and managing corruption of the recruitment process, and for
protecting those who report corruption.
Ensure all public sector employees have received training regarding
the declaration and management of conflicts of interest. This training
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should explain that recruitment processes affected by nepotism,
favouritism, or laxity are a form of public sector corruption investigated
by IBAC.
Redundancy exemption bid fails
The Fair Work Commission (‘the Commission’) has rejected an
application from major defence contractor, Serco Sodexo Defence
Services Pty Ltd (‘SSDS’), to have redundancy payments reduced to nil
for a significant number of SSDS employees whose positions were
made redundant. SSDS lost a number of its contracts with the Defence
Department in 2014, resulting in the redundancy of many employees
at various locations around Australia. SSDS claimed that it had
obtained acceptable alternative employment for these employees, in
most respects with the incoming contractors, and that it should
therefore be exempted from making redundancy payments to these
employees.
An employer can apply for orders under section 120 of the Fair Work
Act 2009 (Cth) (‘the Fair Work Act’) to vary the amount of redundancy
pay that is otherwise due to an employee. This section will apply if the
employee is entitled to redundancy pay and either the employer
cannot pay the amount or the employer ‘obtains other acceptable
employment for the employee’. SSDS made three applications under
this section for employees in each region in which it had lost its
defence contracts. This decision was in respect of the New South
Wales and Australian Capital Territory contracts. Separate hearings
were held for the Queensland contract and the Northern
Territory/Kimberly contract.
The Federal Court has previously considered the test to be applied in
order to determine whether an employer has obtained acceptable
alternative employment for an employee, pursuant to section 120 of
the Fair Work Act. The Court has held that the employer must be a
‘strong moving force towards the creation of the available
opportunity’. Commissioner Roe, who heard this application, adopted
the same approach. The Commissioner noted that ‘[t]here must be a
causal connection between the purpose and effort of the employer
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and the gaining of employment or an offer of employment, by the
employee.’
This application was distinguished from previous applications under
section 120 of the Fair Work Act due to the large group of employees
who were the subject of the application. Ordinarily, the Commission
hears these applications in respect of a limited number of employees
and considers evidence regarding their specific circumstances. As a
starting point, the Commissioner observed that there were differing
levels of cooperation between SSDS and each incoming contractor.
The Commissioner’s task was therefore to determine whether or not the
actions of SSDS in respect of each group of employees who were
offered work with each of the incoming contractors were sufficient to
determine that SSDS had obtained alternative employment for that
group of employees. In these circumstances it was necessary to
examine what were the moving forces behind the incoming
contractor making a job offer and to evaluate the importance of
SSDS’s actions in that context.
Commissioner Roe accepted that SSDS had expended ‘considerable
resources’ to assist its employees in finding new employment. Although
that effort went beyond what was required under the consultation
provisions, it ‘fell well short of action which “causes acceptable
employment to become available” to each of the redundant
employees’ and did not establish that SSDS was the ‘moving force’
behind the creation of the job opportunities.
For example, SSDS did not reach an agreement with incoming
contractors that would guarantee its employees a new job. The
evidence established that each of the incoming contractors ran their
own competitive recruitment process. In such circumstances, it would
generally be relevant to ask, is it likely the applicant would have been
successful regardless of the actions of the outgoing employer?
Another example of evidence indicating a limited casual connection
was that there was no general practice to ensure employees were
able to attend interviews, medical appointments and information
sessions relating to job opportunities on paid SSDS time.
The Commissioner did, however, find stronger evidence of a causal
connection between SSDS’ actions and the obtainment of job
opportunities for its security workforce with the incoming contractor,
MSS Security Pty Ltd (‘MSS’). SSDS made facilities available on site for
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MSS to conduct interviews with SSDS employees, distributed MSS flyers
on all sites, advised SSDS employees of job opportunities with MSS and
provided assistance with MSS job applications to employees who
requested it. The vast majority of SSDS employees who applied for jobs
with MSS were successful: only seven of 147 SSDS applicants were
rejected. Importantly, SSDS had entered into a Memorandum of
Understanding (‘MOU’) with MSS around the transfer of its employees
to MSS. MSS had an incentive under the MOU to maximise its
engagement of SSDS employees.
Commissioner Roe ordered that there be a directions hearing to list
further proceedings with respect to the SSDS security employees who
had obtained employment with MSS. In respect of the other SSDS
employees who had been employed to perform work under SSDS’
NSW/ACT contracts. Commissioner Roe was not satisfied that SSDS had
obtained acceptable alternative employment for these employees.
The application to vary SSDS’ redundancy payments to these
employees under section 120 of the Fair Work Act was therefore
dismissed.
Serco Sodexo Defence Services Pty Ltd (SSDS) [2015] FWC 641
Lessons for Employers
In circumstances where an employer cannot pay the amount of
redundancy pay due to an employee or the employer obtaining
acceptable alternative employment for the employee, the employer
can make an application to the Commission to vary the amount of
redundancy pay.
In order to determine whether the employer has ‘obtained’ alternative
employment for the employee, the Commission will assess whether
there is a causal connection between the purpose and effort of the
employer and the gaining of employment or an offer of employment,
by the employee. The employer must be a ‘strong moving force’
towards the creation of the new job opportunity.
Factors that the Commission will consider include whether the
employer has provided job application assistance to the employee
and paid time off to attend relevant interviews and information
sessions. Evidence of an agreement between the old employer and
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the new employer regarding the hiring of the employees will be
particularly persuasive in establishing that the old employer was a
‘strong moving force’.
Promotion as workplace liability
The Administrative Appeals Tribunal (‘AAT’), in a recent Comcare
appeal, has ruled that a psychiatric injury may be attributed to an
employer in circumstances where an employee has been denied a
promotion. In this case, an ABC employee (‘the applicant’) sought
Comcare support for her psychiatric injury which she said was caused
at work.
The applicant’s case for Comcare payments rested on showing that
her employment contributed to her injuries ‘to a significant degree’.
This requirement is contained in section 5 of the Commonwealth
Safety, Rehabilitation and Compensation Act 1998 (‘the
Commonwealth Act’). Comcare argued that although her injury may
have arisen at work, Comcare was not liable to make payments
because the injury was as a result of a reasonable administrative
action taken in a reasonable manner. Administrative action is defined
to mean a decision on promotion, reclassification, transfer or benefits
attached to employment.
The applicant worked for the ABC in Renmark, South Australia, from
January 2010 to March 2012. She claimed that her condition of anxiety
and depression was caused by bullying and harassment from a direct
supervisor and another staff member. The work environment at the
small Renmark studio was alleged to be ‘toxic’. The applicant had
undertaken counselling in May through to June 2011. Two psychiatrists
at the AAT hearing agreed that the applicant was suffering from poor
mental health. They described her condition as a ‘form of adjustment
disorder with anxiety symptoms’ or alternatively a ‘major depressive
disorder’. The applicant argued that the anxiety and depression
symptoms worsened after she was told of her failure to secure a
promotion. The promotion would have resulted in a transfer from the
Renmark studio and a small pay increase. Having missed out on the
promotion, the applicant was stressed at the thought of returning to
work under her supervisor.
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Comcare outlined how the applicant had worked as a producer in the
Renmark studio over the period of employment in two main roles, firstly
as a producer and subsequently as a temporary cross-media reporter.
The applicant enjoyed the cross-media reporter role more, and it was
this position that she had unsuccessfully applied for as a permanent
role. The applicant argued that the only reason she had applied for
the permanent cross-media reporter role was to escape the toxic work
environment she worked in as a producer at Renmark. She also
maintained that she was suffering the adjustment disorder as a
consequence of the bullying, and not because she missed out on the
promotion.
The AAT was satisfied that on balance, an operative reason for the
applicant’s adjustment disorder was her failure to obtain the position
of cross media reporter. It next had to decide whether the decision not
to promote the applicant was a reasonable administrative action
taken in a reasonable manner. In considering this, the AAT
concentrated on the fact that the supervisor who was alleged to have
bullied and harassed the applicant was on the selection panel for the
permanent cross-media reporter position.
The applicant successfully argued that the ABC’s guidelines for
recruitment and selection had not been followed. The guidelines
require that anyone with a perceived conflict of interest, due to their
relationship with an applicant (which was known in this case to be very
negative), should disqualify themselves from the selection process. It
was relevant that the supervisor in question had kept a record of ‘only
negative entries’ about the applicant. This record detailed what the
supervisor perceived to be the applicant’s failures at work. In these
circumstances, the AAT was satisfied that the supervisor should have
excluded himself from the selection process.
The fact that the supervisor had not excluded himself from the
selection panel ultimately meant that the decision not to select the
applicant was not made in a ‘reasonable manner’. This was despite
the fact that the selection panel report revealed that the supervisor
had awarded some of the highest points to the applicant in the
selection process. The AAT focussed on what an impartial observer
may perceive of the decision, and found that the appearance of bias
undermined the integrity of the selection process, irrespective of the
supervisor’s actual contribution.
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The employee’s Comcare claim was accepted.
Peta Martin v Comcare [2014] AATA 553
Lesson for Employers
Employers can be liable under workers compensation law for any
mental harm caused by a decision concerning promotion, benefits,
transfers or classification, where the decision is not made by way of a
fair process, and on reasonable grounds. Consequently, employers
need to ensure that they follow their selection and decision-making
procedures carefully. If a decision-maker might be perceived to have
a bias, that decision-maker should disclose the bias and, in some
cases, be removed from the decision-making process altogether.
Wrongful dismissal for intoxication
Employers require a high level of performance from their employees,
but as a consequence of more social settings at work, the
performance may be compromised where alcohol has been
consumed. What is the employer’s position where a level of
intoxication is inevitable, and in some cases, seen to be condoned in
the workplace. To deal with the complexities of alcohol and work,
employers often have codes of conduct which include terms to the
effect that any level of intoxication at work will be met with serious
disciplinary consequences for an employee, up to and including
dismissal. But how important is the context in which the intoxication
occurs? What if the employer pays for the drinks? These issues were
recently examined in a breach of contract case heard by the District
Court of New South Wales.
The plaintiff was the former New South Wales State Manager of an
insurance company. The evidence revealed that in the past, there
had been an escalation of his drinking patterns due to personal
reasons. There was also evidence that the manager had been spoken
to by his superior about his practice of having long client lunches,
which included alcohol consumption. After this discussion, he ceased
the practice of long lunches that included alcohol consumption.
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In October 2012, his employer sent him to Melbourne to attend a sales
training conference with his colleagues. The manager’s role at the
conference was as an ‘observer’. He arrived in Melbourne the day
before the training sessions were to commence and was invited to a
dinner with approximately 12 colleagues and others associated with
the conference. At the dinner, around $740 worth of alcohol was
consumed. Judge Taylor, who heard the case, estimated that this
equated to around 80 or more standard drinks. The manager
conceded drinking six to eight drinks at the dinner. The dinner was
paid for by the employer.
After the dinner had concluded, most of the party walked to a nearby
pub to continue drinking. The evidence indicated that around 90
drinks were consumed at the pub by the work party. The manager
conceded drinking eight or nine drinks at the pub and that he was
intoxicated by the time he left the pub. The manager’s colleague paid
the bill at the pub for the work party and this was reimbursed by the
employer.
The manager and this colleague were the last of their party to leave.
Judge Taylor was unable to determine the exact time of departure but
concluded that it was late, sometime between the hours of 2:00am
and 6:45am. They returned to their hotel but the manager, unable to
find his door key, sat down on a bench near the lifts and fell asleep. He
was awakened by the hotel manager at around 7:00am, obtained a
door key, and shortly after retired to his room to sleep.
The manager attended the conference at 9:00am for the first of the
training sessions, which he had been invited to attend as an observer.
His colleague, with whom he had left the pub the night before, failed
to attend. Some senior members of staff observed that the manager
was not at his best. Judge Taylor accepted that the manager smelt of
alcohol, threw a lolly, and for a short period involved himself in the
general discussion during which time he ‘lacked seriousness’ and
made ‘animal noises’ – though there was evidence that the latter was
in relation to ‘conveying information about a recent safari.’ For the
most part, the judge accepted that the manager spent most of the
morning at the back of the room by himself, working on his iPad. Later
that day, he was asked by his immediate superior to return to Sydney.
Following an investigation by the employer’s HR Director, the employer
summarily dismissed the manager for gross misconduct.
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Judge Taylor concluded that the manager was at a low level of
intoxication at the conference and, as this was his workplace at the
time, misconduct was proved in accordance with the employer’s
Code of Work and Disciplinary Counselling Policy. However, his Honour
rejected the conclusion that his misconduct was sufficiently gross to be
fairly categorised as serious misconduct permitting the employer to
summarily dismiss the manager in accordance with his contract of
employment. There was no evidence that the manager’s conduct
had any adverse effect on other staff (e.g. through violence or
offensive language or conduct) or the reputation of the employer (as
there were no clients present). In his nine years of employment with the
employer, the manager had never been disciplined for attending work
intoxicated and there was no evidence that this had occurred before.
Significantly, Judge Taylor held that the employee’s seniority was
relevant to assessing the seriousness of the conduct, but also that ‘the
approach of [the employer] to alcohol consumption was relevant to
the seriousness that should be attributed to intoxication.’ The employer
had submitted that the work party’s attendance at the pub was a
work-related function. The cost of the alcohol consumed by
employees at such events was routinely reimbursed by the employer,
regardless of the quantity of alcohol consumed or the ultimate level of
intoxication of the participants. His Honour found that employees were
expected to socialise and consume alcohol with clients and
prospective clients. The employer had a policy that employees should
‘follow the client’ in respect of alcohol consumption. His Honour
concluded that these matters ‘do not enhance the seriousness of the
intoxication, or suggest that it involved a significant departure from
common company standards.’
Judge Taylor found that the employer’s decision to dismiss the
manager summarily was in breach of his employment contract. It
followed that the manager was entitled to damages. The manager’s
contract allowed the employer to terminate his employment with six
months’ notice. His Honour assessed the prospect of this occurring and
concluded that the employer would have given him notice around
eight months after the conference. The manager was therefore
awarded $99,062 in lost salary, $118,182 for a lost retention bonus,
$48,620 in long service leave and $30,755 in interest. In total, damages
were assessed at $296,650. In addition, the employer was ordered to
pay the manager’s legal costs.
Mitchell-Innes v Willis Australia Group Services Pty Ltd (No 2) 2013/148638
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Lessons for Employers
Employers that routinely pay for excessive quantities of alcohol at
work-related events will have difficulty establishing that a degree of
intoxication at work is commensurate with serious misconduct.
Exercise caution when considering whether to dismiss an employee
summarily. Summary dismissal should be reserved for instances of
serious misconduct, such as conduct that causes serious or imminent
risk to health and safety of a person or the reputation, viability or
profitability of the employer’s business. If the misconduct does not
satisfy this high threshold, the more prudent option is to dismiss the
employee with notice.
Practical Solutions for
Complex Workplaces
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Special Counsel
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Senior Associate
03 8621 4510
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Lawyer
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