Unfair dismissal; serious misconduct and misconduct

The legal issue of what is meant by “misconduct” and “serious misconduct” in Australian workplace and fair work law is vexed. So too is the issue of the relevance if any of a distinction between those phrases, and the context in which they appear.

Here is a refreshing take on the issue from a Western Australian Industrial Magistrate who was looking at the issue from the perspective of the Western Australian Long Service Leave Act.

“What does ‘serious misconduct’ mean? 44 ‘Serious misconduct’ is not defined in the LSL Act. Ms Reardon refers principally to Australasian Meat Industry Employees Union v Australian Meat Holdings Pty Ltd (1999) 93 IR 308 where Dowsett J considered authorities discussing the meaning of ‘serious’ and ‘misconduct’, although it should be noted that this was in the context of the meaning of ‘serious or wilful misconduct’ in the relevant Award. 45 Distillation of his Honour’s reasons appear to do no more than say that whether misconduct can be considered ‘serious’ is a question of fact in the context of the employment relationship, albeit that he noted the meaning of the words were in the context of entitlement to pro-rata long service leave payments. His Honour noted, at [87], that an employee’s alleged misconduct could be such as to justify his or her dismissal while not being serious or wilful misconduct for the purposes of the provision relating to loss of long service leave benefits. 46 In Concut Pty Ltd v Ivor Worrell & Anor [2000] HCA 64 Kirby J, at [51], sets out a number of points as it relates to summary dismissal for misconduct (noting that the employee/employer relationship was not governed by any statute, regulation or industrial award): • the ordinary relationship of employer and employee at common law is one importing implied duties of loyalty, honesty, confidentiality and mutual trust; • it is only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provisions aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and the employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. 47 Relevantly, the majority in Concut at [17] stated (citations omitted): The issues which must be determined are to be understood in the context of the law respecting employment relationships. It would be unusual for this to be purely contractual. Statute may impose obligations to observe industrial awards and agreements, and in some instances the relevant terms of the employment relationship may be found in the industrial award which binds the parties at the relevant time. Further, as Mason J pointed out in Hospital Products Ltd v United States Surgical Corporation, the relationship between employee and employer is one of the accepted fiduciary relationships; their critical feature is that the fiduciary undertakes or agrees to act for or on behalf of, or in the interests of, another person in the exercise of a power or discretion that will affect the interests of that other person in a legal or practical sense. 48 Further, at [25] (citations omitted): In Pearce v Foster, Lord Esher MR stated it to be a “rule of law” that “where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him”. In Blyth Chemicals Ltd v Bushnell, in the course of considering the position of the respondent, who was the manager of the appellant’s business, Starke and Evatt JJ said: “As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant”. 99 W.A.I.G. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 263 In the same case, Dixon and McTiernan JJ said: “Conduct which in respect of important matters is incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground for dismissal”. 49 In North v Television Corporation Ltd (1976) ALR 599 Smithers and Evatt JJ stated (in the context of summary dismissal without notice): It is of assistance to consider the expression “misconduct” by reference to subject matter to which it is related and the context in which it appears. The subject matter is the termination by one party against the will of another of a continuing contract of employment on the ground of breach of one of the terms of the contract. And the context is such as to indicate that certain breaches of a non-serious nature, some of which would be within the connotation of misconduct, are not regarded as grounds for termination. In such a situation it is reasonable to interpret the expression “misconduct” as referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment. 50 Furthermore, arguably, the burden of proving the relevant misconduct is on the respondent: North at page 599. The standard of proof being on the balance of probabilities. 51 In Wall v Wescott (1982) 1 IR 252 (Industrial Commission of New South Wales, 12 March 1982), Watson J considered the meaning of ‘serious and wilful misconduct’ in the context of the Long Service Leave Act 1955 (NSW) stating, at 256, (omitting citations): Misconduct justifying termination of employment includes misconduct outside the particular employment which is incompatible with the continuance of the employment relationship. The misconduct must be at least such as would justify termination, to be relevant under s. 4(2)(a)(iii) of the Long Service Leave Act, but with a further element, comprehended by the terms “serious and wilful”. The category of misconduct thus intended is a particular type of misconduct which, in terms of gravity, must be capable of being described as serious beyond circumstances which would simply justify termination. Secondly, it must be subjectively considered in view of the requirement that it be ‘wilful’. 52 ‘Serious misconduct’ in s 8 of the LSL Act does not include the word ‘wilful’. Further, s 8 of the LSL Act does not refer to an employee’s termination in the context of summary dismissal. Therefore, in my view, for an employee to have engaged in ‘serious misconduct’ for the purposes of the LSL Act, the employer need not have summarily dismissed the employee so as to highlight the gravity of the misconduct. Otherwise a careful and prudent employer will be prejudiced by a sense of fair play before deciding to terminate an employee. 53 For the purposes of the LSL Act, the misconduct must be of sufficient gravity such as to justify termination of the employment relationship in the context of beneficial legislation. That is, the misconduct must be of a type that justifies not only termination but is of a gravity capable of denying the employee an entitlement to a statutory benefit where they have worked for an employer for a lengthy period of time. 54 Having regard to this framework, did Ms Reardon’s conduct amount to ‘serious misconduct’ in the context of s 8 of the LSL Act? 55 In determining this question, the following agreed facts in the ASF and findings of fact in the Unfair Dismissal Decision are relevant: • the respondent operated two small businesses with Ms Reardon working at the Stratton Park Pharmacy. Three people worked at the Stratton Park Pharmacy at any one time5 ; • Ms Reardon was employed on a casual basis at the Stratton Park Pharmacy from 31 March 2003 to 13 October 2017 or approximately 14.5 years6 ; • Ms Reardon first became entitled to long service leave in March 2013 and took the total first entitlement in April to June 20147 ; • there was a personality clash between Ms Reardon and a pharmacist at the Stratton Park Pharmacy and the respondent initially sought to separate the two by having them work different shifts8 ; • while the relationship between Ms Reardon and the pharmacist was poor from the outset, it appears that the real deterioration in the relationship manifested in early 2017 and continued until Ms Reardon ceased working for the respondent9 ; • sometime either in or after July 2017, Ms Reardon, unhappy with the respondent asking her if she wished to work at the other pharmacy operated by him, decided to investigate behind the respondent’s back his reasons for asking to work at the other pharmacy thereby demonstrating a lack of confidence and respect in her employer10; and • when directed by another pharmacist to train a new person to take over the combined role of weekend Pharmacy Assistant at Stratton Park Pharmacy, Ms Reardon told a third person the pharmacist could ‘get stuffed’ because she felt aggrieved that someone else was working ‘taking [her] hours’, irrespective of the respondent’s reasons for making this decision11. Determination 56 The combined effect of some of these factors demonstrated a lack of respect and trust by Ms Reardon for the respondent and his business interests in a small business and undermined his role as her employer and was destructive of the employment relationship. 264 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 99 W.A.I.G. 57 However, and notwithstanding, I accept the respondent was entitled to terminate the employment relationship where it had in all reality irretrievably broken down, I am not satisfied the termination of Ms Reardon’s employment was for ‘serious misconduct’ as that term is defined in the LSL Act. 58 Simply put, Ms Reardon had worked for the respondent for long period of time. To the extent her employment relationship with him had soured to the point of termination this was towards the end of her employment period. Irrespective of her relationship with the other pharmacist, there is no evidence before the IMC upon which I could be satisfied to the requisite standard that she did not otherwise carry out her duties in a satisfactory manner. 59 True enough the behaviour that ultimately saw her employment terminated was poor and no doubt justified her termination, but I am not satisfied that the behaviour or misconduct was in all the circumstances of a gravity capable of denying her an entitlement to a statutory benefit where she had otherwise worked for the respondent for a lengthy period. 60 Accordingly, I am satisfied Ms Reardon is entitled to pro-rata long service leave payment in the agreed amount of $2,309.54 for the period 31 March 2013 to 13 October 2017 pursuant to s 8(2)(c) of the LSL Act.”


Reardon v Lagana trading as Stratton Park Pharmacy (2019) WAIRC 104 delivered 23 January 2019 per Scadden IM