Employee conduct outside work and unfair dismissal


Employee conduct outside work and unfair dismissal

An employer may be confronted with ‘bad behaviour’ by an employee, such as an act of misconduct, criminal activity or inappropriate behaviour that has occurred outside working hours and not on company premises. This article summarises employee conduct outside work hours and its relevance to unfair dismissal.


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An employer may be confronted with ‘bad behaviour’ by an employee, such as an act of misconduct, criminal activity or inappropriate behaviour that has occurred outside working hours and not on company premises. This article summarises employee conduct outside work hours and its relevance to unfair dismissal.
An employee’s actions may, for example, involve inappropriate behaviour or activity while the employee was wearing a company uniform, or behaviour that may potentially damage the company’s image. Industrial tribunals have considered a number of factors that relate to an employee’s dismissal because of out-of-hours conduct.
Ordinarily, it is only in exceptional circumstances that an employer has a right to extend any supervision over the private activities of an employee.
However, conduct that gives rise to a material risk of damage to an employer’s interests, even if there is no actual damage in the particular case, may nevertheless be conduct that attracts the legitimate concern of the employer and, depending on the circumstances, conduct that justifies the employee’s dismissal. In considering the employee’s out-of-hours conduct in relation to the employment contract, Fair Work Australia (FWA) considers certain factors in determining the fairness, or otherwise, of an employee’s dismissal. The factors relating to fairness normally considered include:
  • whether there is a company policy that deals with out-of-hours conduct and whether the policy is lawful and reasonable 
  • whether the reason for dismissal was valid 
  • whether the dismissal was harsh, unjust or unreasonable.
Valid reason for dismissal
While the Fair Work Act 2009 — see ss379ff — does not provide a definition of ‘valid reason for termination’, this term is generally interpreted to mean the reason for termination must be defensible or justifiable on an objective analysis of the relevant facts, and the validity is judged by reference to the tribunal’s assessment of the factual circumstances as to what the employee was capable of doing or has done.
The consideration of whether there was a valid reason for termination is a separate issue from the determination of whether a dismissal was harsh, unjust or unreasonable. This means there may be a valid reason for termination, but the dismissal is still considered to be harsh, unjust or unreasonable.
Harsh, unjust or unreasonable
Under the Act, a dismissal may also be considered ‘harsh, unjust or unreasonable’. A dismissal may be:
  • harsh — because of its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the alleged offence; or
  • unjust — because the employee was not guilty of the alleged offence on which the employer acted; or
  • unreasonable  because it was decided on inferences that would not reasonably have been drawn from the material before the employer.
Note: it may be that a termination is harsh but not unjust or unreasonable; unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust.
Common law
The courts have generally determined that the question of relevance of a conviction or an employee’s alleged misbehaviour should be considered in terms of whether or not the employee has breached an express or implied term of the contract of employment. For example, an accountant who has committed an act of dishonesty for which he or she may have been charged and convicted in the course of some activity outside their employment might be said to have breached a term of their contract of employment.
Unfair dismissal matters
A Full Bench of FWA heard a matter which involved a brewing company that dismissed an employee after being convicted of high range drink-driving, while driving out of work hours in a non-work vehicle.
The employer argued the company policy was in place because such an offence could potentially damage the company’s image, particularly if the subsequent court proceeding is reported in the media. The employer had a ‘Responsible Drinking Policy’ that stated an employee convicted of drink-driving (whether on business or not) will be instantly dismissed.
After conducting an investigation into the facts (the employee was charged with three times the state’s legal driving limit), and despite the employee’s good work record and stable employment, the company summarily dismissed the employee for breach of company policy. The dismissal was upheld by a Full Bench of FWA because it considered the reason for the dismissal as valid while it also determined the dismissal was not a disproportionate response to the offence, despite the employee having an unblemished employment history with the employer.
It should be noted that while the company had a valid reason for dismissal (the lawfulness/reasonableness of the company policy involving out-of-hours conduct by employees), the employer still had to satisfy FWA that the dismissal was not harsh, unjust or unreasonable. Factors considered by FWA on this aspect included that procedural fairness was applied (when the employer was made aware of the breach of the policy the employee was given a number of opportunities to put forward matters in mitigation), while the employee was also aware of the company policy and the potential consequences (dismissal) if the policy was breached.
Other cases
FWA (and its predecessors) have determined a number of different circumstances in relation to an employee’s out-of-hours conduct which resulted in the employee’s dismissal. Circumstances in which the employer has successfully argued the employee’s dismissal was not unfair include:
  • the dismissal of an employee because of offensive behaviour in a hotel room after a combined Christmas party and farewell party
  • the dismissal of an employee who punched a fellow employee in the face at a private New Year’s Eve party attended by other employees
  • the dismissal of a male employee who used offensive, abusive and threatening language towards a female colleague at a motel being used by staff in connection with a company training course.
Reference to the specific cases mentioned above can be found at WorkplaceInfo’s  Employment topics A–Z, under Misconduct — out of hours conduct
Other matters that involve more complex legal principles have dealt with the vicarious liability of an employer for sexual harassment that occurred away from the workplace. An employer involved in such an claim by an employee should seek appropriate legal advice.
In a case involving the accessing of pornography outside work hours on a work computer by an employee, the Federal Court accepted the employer’s submission that it was entitled to prescribe the uses of the laptop over which it had ownership, and that it had used software to obtain and use personal information stored on the employee’s laptop for the ‘lawful’ purpose’ of monitoring compliance with the Code of Conduct. 
Company policy
Large business employers may have a company policy and procedure that usually includes an employees’ Code of Conduct. The Code of Conduct should include out of hours behaviour and criminal activities involving employees where the employer’s business may be vulnerable to such activities. Having such a company policy would assist the employer in preparing a defence in an unfair dismissal claim before FWA. In relation to the company policy, FWA will usually consider the following:
  • whether the ‘out of hours conduct’ company policy is both lawful and reasonable
  • whether the employer has stressed the importance of the particular policy to the business 
  • whether the employer made it clear to all employees that any breach is likely to result in discipline or, possibly, termination of employment.
As mentioned above, the employer should not rely solely on the existence of a company policy that refers to out-of-hours conduct as justifying an employee’s dismissal.
Employees’ out of hours conduct company policy 
The following is an example of a company policy that deals with out of hours conduct by employees.
While all employees of [XYZ Pty Ltd] have a right to privacy, criminal or otherwise inappropriate conduct occurring outside the workplace and negatively impacting on [XYZ Pty Ltd], may result in disciplinary action or a requirement that the particular private conduct cease. Examples of such conduct include, but are not limited to:
  • criminal offences such as stealing, or other dishonesty relating to cash or goods
  • violence, harassment or discrimination towards other employees of [XYZ Pty Ltd], that occurs outside of the workplace, and not during working hours.
Disciplinary action may be taken where the conduct of the employee outside the workplace:
  • brings [XYZ Pty Ltd] into disrepute
  • damages the interests of [XYZ Pty Ltd]
  • is incompatible with the employee’s duty of good faith with [XYZ Pty Ltd]
  • damages the relationship between [XYZ Pty Ltd] and the employee, or other employees.
Disciplinary action is dealt with in accordance with [XYZ Pty Ltd’s] guidelines for ‘Disciplinary/Dismissal’. Employees should note that dismissal is a potential outcome of such behaviour and will also be dealt with in accordance with the abovementioned documentation. In determining the nature of disciplinary action to be taken, [XYZ Pty Ltd] will take into account the following:
  • the nature of the conduct
  • whether the conduct adversely impacts on the business or public reputation of [XYZ Pty Ltd]
  • the connection of the conduct with the employment relationship
  • the effect of the conduct on the relationship between [XYZ Pty Ltd] and the employee
  • any remedial action taken by the employee
  • any mitigating circumstances
  • the employee’s work history
  • any other matter [XYZ Pty Ltd] considers relevant.
This policy should also be read in conjunction with any policy which deals with ‘Employees’ Code of Conduct.’
Source: Paul Munro, IR Consultant.
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