Employer lacked reasonable grounds to believe employee was stealing


Employer lacked reasonable grounds to believe employee was stealing

A worker has won her unfair dismissal case and $30k of compensation after her employer failed in its argument that she was validly fired for taking $7000 of annual and long service leave to which she was not entitled.


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A worker has won her unfair dismissal case and $30k of compensation. Her employer failed in its argument that she was validly fired for taking $7000 of annual and long service leave to which she was not entitled. 

Facts and Background

Ms N had worked in an administrative role for "Metropolitan Taxi Club", an incorporated association, for nine years. An "incorporated association" is a company-like legal entity although it differs from companies in several key ways. One difference is in terminology: it has "office holders" rather than directors. Ms N was dismissed in 2017 for an alleged  ‘dishonest act’. It was alleged by her employer that she had taken $7000 overpayments to which she was not entitled. 

In the lead up to her dismissal, Ms N requested four weeks of annual leave to visit her mother who had been hospitalised in the Philippines. It is alleged that one of the office holders of MTC, Mr A, asked her to calculate her long service leave and then take it even though she was not entitled to it until August. 

Mr A denies he ever requested that she take her long service leave. 

Regardless, she said she believed she was entitled to three months of leave after ten years of service and she drew a cheque that was signed by two office holders, Mr A and Mr M. 

When Ms N came back to work in August, a meeting was held and her employers told her she was not entitled to be at work as she was on paid leave. In September, two weeks after the meeting, Ms N received a letter, terminating her employment on the grounds of dishonest conduct. Her employers alleged that she had wrongfully paid out too much money to herself.  A reconciliation document was attached to the letter which purported to show much excess annual leave she had taken. It also purported to show how much long service leave that she was entitled to, which MTC stated was only eight and a half weeks. 

The letter also listed her period of employment as 25 October 2007 to 20 July 2017. However, Ms N had been working for an associated entity (a company) from August 2007 until she started with MTC. Mr A and Mr M are directors of the associated company, and all Ms N’s entitlements were transferred to MTC. The commission was satisfied that the correct employment period was from August 2007 to September 2017. 

The Law

Under s394 of the Fair Work Act, a remedy for an unfair dismissal application will be granted where the Fair Work Commission is satisfied that the worker's dismissal was harsh, unjust or unreasonable.  

The Small Business Fair Dismissal Code applies to business employers with less than 15 employees. Immediate dismissal without warning or notice under the code is fair if the employer reasonably believed at the time of the dismissal that there was serious misconduct. While the employer must believe that there was misconduct, it is not necessary for the employer to prove that the misconduct actually took place or that the employer was correct in its belief. Serious misconduct includes, but is not limited to, theft.


MTC argued that, at the time of Ms N’s dismissal, it believed that she had acted dishonestly in taking paid leave to which, on the advice from its accountant, she was not entitled. It argued that the reconciliation document provided reasonable grounds for which Ms N was terminated — she had made excess payments to herself in both annual leave and long service leave. 

Ms N argued that the extent of the company's inquiry was limited to a review of records which had an incorrect commencement date, cessation date and which contained an incorrect rate of pay. She further argued that there was no evidence that she was stealing money as her employers had signed the cheques for the annual and long service leave. 


The Fair Work Commission considered whether Ms N’s dismissal was consistent with the Small Business Fair Dismissal Code. It was not satisfied that the employer held a reasonable belief that Ms N had engaged in dishonest conduct as there were several errors in calculations by the employer and in the dates and the rates of pay. The commission was not satisifed that the office holders had carried out a reasonable investigation and therefore did not reach a reasonable conclusion. 

After concluding that the dismissal was not consistent with the code, the commission considered whether the dismissal was harsh, unjust or unreasonable under s387 of the Act. 

The commission was not satisfied that there was a valid reason as her employers authorised the cheque payment, there was no evidence that she ‘deliberately’ paid more leave than she believed and, (given the miscalculations) the true amount of overpayment was not put in evidence before the commission. They further found she was not notified of the reason for dismissal before being fired, nor was she given an opportunity to respond. 


The commission was satisfied that Ms N’s dismissal was harsh, unjust or unreasonable and she was unfairly dismissed.  The commission ordered MTC pay Ms N over $30,000 in compensation for lost wages. 

The bottom line: An employer must have a valid reason, and must offer a worker fair procedure, before carrying out a firing. A person can be validly fired without notice or warning for serious misconduct if the employer had an objectively reasonable belief, based on reasonable grounds, that the employee was engaging in serious misconduct. It will be difficult for an employer to successfully claim that it had a reasonable belief if the 'facts' on which it formed that belief were incorrect and if it carried out an inadequate investigation to discover what the facts actually were. 

Read the judgment

VN v Metropolitan Taxi Club Inc [2018] FWC 3293 (13 June 2018) 
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