We still see many clients whose disciplinary policies dealing with misconduct require sequential warnings before an employee’s employment can be terminated for misconduct, unless the conduct amounts to ‘serious misconduct’.

The prescriptive nature of these policies reduces an employer’s discretion to determine a sanction which is appropriate to each individual case.

The result? Employers scrambling to see if the facts can be made to fit the ‘serious misconduct’ category. This is a course fraught with danger.

The Fair Work Commission recently issued a timely reminder about what is, and is not, ‘serious misconduct’.

If it is simply the employer accepting the employee, through their conduct, has shown no interest in continuing the contractual relationship and has effectively ‘blown it up’. Then, the employer can choose to accept the employee’s repudiation, by summarily dismissing the employee, therefore ending the contractual relationship. Of course the employer might choose to keep the contract on foot – but the employer has the right, if the employee’s conduct is ‘serious misconduct’, to accept that this will effectively end the relationship.

What then is ‘serious misconduct’?

In Trudi Puszka v Ryan Wilks Pty Ltd T/A Ryan Wilks Proprietary Limited [2019] FWC 1132 (7 March 2019) Commissioner Cambridge found after rejecting the employer’s evidence about the conduct of an employee at a function hosted by one of the company’s clients, the employee was nevertheless certainly intoxicated at the function.

Was this serious misconduct justifying summary dismissal?

The answer was no.

"On any reasonable and objective contemplation, a single act of drunkenness at an after work function which did not involve any abusive or aggressive behaviour, and for which no serious risk to the reputation or viability of the employer’s business could be established, would not represent misconduct that provided a sound, defensible and well-founded reason for dismissal,” Commissioner Cambridge said.

"Frankly, if one act of inoffensive drunkenness at an after work function provided valid reason for dismissal, I suspect that the majority of Australian workers may have potentially lost their jobs."

"In this instance, the misconduct of the [project administrator] which involved her drunkenness during the 20 July farewell drinks function did not possess any characteristic of wilful attack against the employment relationship.”

The Commission pointed out serious misconduct requires an employer to establish that the employee’s conduct has been “so inconsistent with project administrator duties under the employment contract that it strikes down any reasonable suggestion that the employer-employee relationship can continue in the future."

Reinstatement was ordered.

On appeal, a Full Bench granted leave for the employer to appeal but upheld the finding that in this instance, serious misconduct was not established.

So, what are the lessons?

1. Avoid overly prescriptive disciplinary procedures, especially in enterprise agreements, that inhibit your capacity to deal with the facts and circumstances of misconduct on a case-by-case basis. Rigid ‘three warnings’ structures are not fit-for-purpose and once included in an enterprise agreement, are almost impossible to remove through later bargaining rounds.
2. Recognise that the default position is that if termination is being contemplated, notice is required unless and until a case of serious misconduct is established. This is so at common law and is reflected in the National Employment Standards through section 117 of the Fair Work Act 2009, which prescribes statutory minima for periods of notice in respect of employees within the Federal system.
3. Only consider summary dismissal in cases where the misconduct is so serious, wilful and deliberately destructive of the employment relationship that it can truly be said to constitute ‘serious misconduct’, that is, of a nature that deliberately ‘blows up’ the employment relationship.

Regulation 1.07 of the Fair Work Regulations 2009 provides some guidance, but this is not an exclusive definition. Indeed, the Regulation expressly recognises that serious misconduct has its ‘ordinary meaning’. But the Regulation does refer to categories such as theft, fraud, assault, refusing a lawful and reasonable instruction and even intoxication at work.

As an aside, the concept of what is now to be considered misconduct unless ‘at work’ is an interesting one, which will be discussed in a future article. The case we have referred to above refers to a single act of intoxication at an ‘after work’ function, but what is after work compared with ‘at work’ is contentious.

Finally, err on the side of caution. As we are reminded in Puszka, the default remedy in cases where a claim of unfair dismissal has been successfully made out is reinstatement. A hasty characterisation of simple misconduct as ‘serious misconduct’ warranting summary dismissal can result in the employee concerned arriving back in the workplace under a reinstatement order with all the complications, particularly from a general protections and workforce re-integration perspective, that this entails.