Dec 1444/98 N Print Q9292
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
s.170CE application for relief in respect of termination of employment
Telstra Corporation Limited
(U No. 20564 of 1998)
VICE PRESIDENT ROSS
MELBOURNE, 4 DECEMBER 1998
Alleged unlawful termination.
This matter relates to an application by Mr B. Rose (the applicant) pursuant to s.170CE of the Workplace Relations Act 1996 (the Act) for relief in respect to the alleged unlawful termination of his employment by Telstra Corporation Limited (the respondent, Telstra).
In accordance with the Act the matter was referred to Mr M. Ellis for conciliation. This conciliation took place in Tamworth on Thursday, 23 July 1998. A second conciliation took place in Sydney on 2 September before Commissioner Cargill but was not successful in resolving the claims.
The applicant lodged an election to proceed to arbitration with s.170CFA(1) of the Act on 4 September 1998 and the matter was heard in Sydney on 12 November 1998.
I am satisfied that the requirements of s.170CG(1) have been met and I may proceed to arbitrate the matter.
The termination of Mr Rose's employment arose out of an incident which took place in the early hours of Friday, 14 November 1997. The factual circumstances leading to his termination are largely uncontested.
Mr Rose was employed as a Communications Officer Grade 3 with the respondent, based in Tamworth. In this capacity he carried out technical work at the direction of a work group supervisor. The work he performed primarily involved fixing faults, installing new services and some minor maintenance work. A high level of customer interaction was required.
In November 1997 the Telstra staff in the Armidale area were overloaded with work due to an increase in the connection of new services and in reported faults. To assist in relieving this workload Mr Rose agreed to go and work in Armidale for four days commencing on 11 November 1997.
On his arrival in Armidale Mr Rose saw a Mr Wayne Eveleigh, the Field Service Manager for the Armidale Service Delivery Area. Mr Eveleigh informed Mr Rose that a friend of his, Mr Carl Mitchell, was also in Armidale. Later that day Mr Rose contacted Mr Mitchell. In the course of their conversation Mr Mitchell mentioned that there was a spare bed in his room at the St Kilda Hotel and invited Mr Rose to share the room with him. Mr Rose accepted.
While in Tamworth Mr Rose was paid travel allowance. Travel allowance applies where an overnight stay is involved. Employees can chose how to spend their travel allowance, including where they stay. At the time of the incident the amount paid to employees on travel allowance was $108.45 per night.
The 11th and 12th of November passed without incident. After work on Thursday 13 November Messrs Rose and Mitchell went to dinner and then to a nightclub. Both men were drinking throughout the evening. According to Mr Rose's evidence he had three beers and four or five seven ounce bourbons.
While at the nightclub Mr Rose noticed that Mr Mitchell was missing and went to look for him. According to Mr Rose's evidence the following then took place:
"D8. I found him at the bar having an argument with a person we both knew. I tried to appease Carl but he told me to `fuck off'. The ladies saw all this.
D9. I went back to my chair and Carl followed. He ripped his shirt off and growled at me. I thought he wanted to fight me. This upset me. I told Carl that he did not need to `fight with these fellows'. I told him that I would have words with him later. I wanted to avoid a scene at the place." [Exhibit A2]
Mr Mitchell left the nightclub at about 2.30 a.m. and returned to his hotel room. Mr Rose followed some 20 to 30 minutes later. On his way back to the hotel he met a woman called `Lee'. When Mr Rose arrived at the hotel room he asked Lee to wait outside while he `had a word with his mate inside' (or words to that effect). When he entered the room Mr Rose rearranged the furniture to create a space in the middle of the room. He then said `Well, that's your boxing ring if that's what you want mate'. According to Mr Rose's evidence the following then took place:
"D11. I went to the room. I pushed a bed aside and said to Carl: "I thought you were my mate, I thought you were a friend. If you want to fight you can stand up and fight like a man." I said that 3 or 4 times.
D12. Carl came over and put his arm around me and said "I know how you feel". I said "you don't know how I feel mate. He said "I can do you any time I like mate". I said "Go ahead and do what you like". I think I stood up. Things moved quickly and my recollection is not clear about these events.
D13. He went on to the window and thrust his fists through the window.
D14. I grabbed a bed and tried to push it between the two of us. He got around it and I was able to push him to the ground. Lee came into the room and I told her to get out. Carl struck me in the chest with a piece of glass.
D15. I managed to get free and bolt out the door. I grabbed Lee and we went downstairs. We called an ambulance arrived. (sic) I went to hospital and required 12 stitches."
The police were called and Mr Mitchell was taken into custody.
Mr Rose was due to start work on Friday 14 November at 7.30 a.m. At 7.50 a.m. he rang Mr Warhurst, his Tamworth supervisor, and said that he had been in an altercation with Mr Mitchell during which Mr Mitchell had attacked him with a piece of glass and as a result he had to have 12 stitches. Mr Rose was unable to work on Friday morning and he returned to Tamworth in the afternoon. Mr Rose attended work as normal on the following Monday, and was suspended with pay.
A medical certificate was issued by Dr R. Loeve which stated that the applicant was suffering from a laceration to his abdomen and certified him unfit for duty from 14 November to 17 November 1997.
At the time of the incident neither Mr Rose nor Mr Mitchell were in their Telstra uniforms. Nor were they `on-call'.
The owner of the St Kilda Hotel was aware that Messrs Rose and Mitchell were Telstra employees. The court listing in respect of the criminal charges against Mr Mitchell appeared in the local paper. But apart from this there is no evidence of any adverse publicity in respect of the incident. Mr Warhurst gave evidence to the effect that the incident was well known at the Tamworth Telstra depot. He also said that his sister and brother in law reside in Tamworth and they were aware of the incident. On this basis he said `there obviously were rumours around'.
On 8 December 1997 Mr Warhurst sought a written explanation of the 14 November incident from Mr Rose. This procedure is known as a `please explain'. Mr Rose provided the explanation sought and on 24 December 1997 he was suspended without pay.
On 1 April 1998 Mr Rose was advised that he had been found guilty of improper conduct and his employment was terminated. A subsequent appeal to the Disciplinary Appeals Board confirmed his termination.
No disciplinary action was instituted against Mr Mitchell. He was charged and ultimately convicted of malicious wounding and sentenced to four months imprisonment. Mr Mitchell resigned his employment with Telstra on 30 January 1998.
Three further matters should be mentioned.
First, the applicant's relationship with Mr Mitchell commenced in late 1996 when they began sharing a house. In March 1997 an incident took place at their home. Mr Rose returned home with two others to find Mr Mitchell talking on the phone to his Telstra supervisor, Mr Eveleigh. Mr Mitchell was holding a knife to his own throat and appeared suicidal. The applicant tried to talk to Mr Mitchell. Mr Mitchell became violent. He assaulted the applicant and stabbed another person.
As a result of this incident Mr Mitchell was charged with malicious wounding, assault occasioning actual bodily harm and common assault. Bail was granted subject to the following conditions:
"The grant of bail is subject to the following conditions that I enter into:
1) The accused person not consume any intoxicating liquor
2) The accused person not enter any premises licensed under the Registered Clubs or Liquor Act
3) The accused person report to the officer in Charge of the Tamworth Police Station each Friday between 8am and 8pm
4) Not to approach, threaten, Assault, or Unlawfully interfere with Mark Jeffrey DINGLE or Bryce Edward ROSE" [see Attachment 2 to Exhibit A2]
At the time of the incident on 14 November 1997 the applicant was unaware of the bail conditions applying to Mr Mitchell.
After the incident in March 1997 Mr Mitchell spent some weeks in the psychiatric unit at Tamworth Base Hospital receiving treatment. He subsequently returned to work with Telstra.
No disciplinary action was taken against Mr Mitchell arising out of the March 1997 incident. Mr Eveleigh was cross examined about his failure to discipline Mr Mitchell during which the following exchange took place:
"Mr Dwyer: Did you consider taking disciplinary action against Mr Mitchell?
Mr Eveleigh: No because it was an out of work event.
Mr Dwyer: What do you call out of work?
Mr Eveleigh: Well it was after hours.
Mr Dwyer: So if it was after hours you would not initiate disciplinary action?
Mr Eveleigh: No other than just make sure you just get to work and keep them under close supervision."
[Transcript 12 November 1998, p 53 at lines 28-33]
Mr Eveleigh was Mr Mitchell's immediate supervisor at the time of the March 1997 incident and was responsible for initiating any disciplinary action against Mr Mitchell. Mr Eveleigh's supervisor was Mr Warhurst. In his evidence Mr Warhurst said that he felt that Mr Eveleigh had handled this incident appropriately [Transcript 12 November 1998, p32 at lines 5-10].
Second, in July 1996 the respondent prepared a document entitled `Our Company Values and Our Code of Conduct' (referred to as the Code of Conduct). A copy of the Code of Conduct was mailed to all Telstra employees and Mr Rose conceded that he had received a copy. Under the heading `Outside Employment and Other Activities' the Code states:
"We should avoid outside activity likely to affect adversely either our work or someone else's (for example, in terms of occupational health and safety), or which could discredit either ourselves or our Company, or which could conflict with the Company interests." [Exhibit R7 at p15]
Counsel for the respondent conceded that the above extract was the only part of the Code which was directed to what was expected of employees while on travelling allowances. [Transcript 12 November 1998, p86 at lines 29-35 and p87 lines 1-23]. Further, there is no suggestion that conduct in breach of the Code would lead to termination.
Third, the applicant filed a claim for workers compensation in respect of the injury he suffered on 14 November 1997. The statement of reasons refusing the claim states, among other things:
"6. In order for compensation benefits to be payable, I must be satisfied on the balance of probabilities that the claimant sustained an injury, being a physical or mental injury suffered by an employee, for the purposes of Sections 4(1), 6 and 14 of the SRC Act which has arisen out of or in the course of his employment with Telstra.
7. On the evidence currently before me, I am not satisfied there is a causal nexus between the performance of the employee's duties and the incident of 14 November 1997 exists. The confrontation between the claimant and Mr Mitchell could not in any way be related to the applicants performance of the duties of his employment.
8. I therefore determine that the Telstra Corporation Limited is not liable to pay compensation in respect of this compensation claim." [see Attachment 4 to Exhibit A2]
On the basis of the material before me the following findings may be made about the incident on 14 November 1997:
1. The applicant's employment was terminated because of his conduct in relation to the incident which took place at about 3.00 a.m. on Friday 14 November 1997.
2. At the time of the incident:
· both employees were being paid travelling allowance by the respondent; and
· neither employee was in their Telstra uniform, nor were they `on-call'.
3. In relation to the incident I find that:
· the applicant verbally provoked Mr Mitchell;
· Mr Mitchell thrust his fists through the window of the Hotel room, there was a scuffle and Mr Mitchell struck the applicant with a piece of glass;
· the applicant was not charged by the Police over the incident;
· Mr Mitchell was charged, convicted and sentenced to four months imprisonment as a result of the incident.
4. The applicant's injuries required 12 stitches and he was medically certified as being unfit for duty between 14 and 17 November 1997.
5. Mr Rose did not perform any work during the morning of 14 November 1997. In the afternoon he travelled back to the Tamworth depot. He reported for work on Monday 17 November.
The primary submission advanced by Mr Dwyer on behalf of the applicant was that the incident on 14 November 1997 had nothing to do with Telstra. It did not take place during working hours and did not constitute a valid reason for the applicant's termination. Two alternative submissions were advanced:
1. The applicant should have been warned that any future conduct of the type complained of would lead to his termination. The failure to provide such a warning was a relevant matter to be taken into account pursuant to s.170CG(3)(e).
2. Telstra's conduct is a relevant consideration and should be taken into account. Arising from the incident in March 1997 Telstra management should have been on notice that Mr Mitchell had been charged with a serious offence. Telstra made no inquiries as to what the charges against Mr Mitchell were or to ascertain the bail conditions applicable to him. The failure to make such inquiries amounted to a breach of the duty of care they owed to their employees.
Mr Gardner, counsel for the respondent, submitted that the applicant had deliberately and wilfully set upon a course of conduct which had very serious consequences. The serious consequences which were said to arise from the incident on 14 November 1997 were:
· damage to public property (i.e. the broken window in the Hotel room) in circumstances where the Hotel owner knew that the two persons involved were Telstra employees;
· another Telstra employee (Mr Mitchell) was charged, convicted and imprisoned as a result of the incident;
· the criminal proceedings arising from the incident were public proceedings; and
· the applicant was injured and was unable to attend for work.
According to Mr Gardner the fact that the incident involved two Telstra employees who were on travelling allowance brought the incident within the scope of Telstra's concern. The `key link' between the incident and the applicant's employment was submitted to be the fact that Mr Rose was on travelling allowance at the relevant time. This was said to be the factor which separated the incident in March 1997 from the one which led to Mr Rose's termination.
Mr Gardner also submitted that the applicant's dismissal was not disproportionate in the circumstances as the respondent had serious doubts as to the trust which it could place in Mr Rose as a result of his action in provoking the incident on 14 November 1997. In this regard Mr Gardner relied on paragraph 16 of Mr Lambert's witness statement, which is in the following terms:
"This incident is a serious issue for Telstra. The altercation between Mr Rose and Mr Mitchell involved a fight between two employees which caused damage to a hotel room in a relatively small country town. It reflects badly on other employees who go above and beyond what has been asked of them. It tarnishes the public perception of Telstra employees and discredits the Company in circumstances where Telstra is striving to instil public confidence in Telstra and its employees. It is obviously crucial that Telstra has faith and confidence in employees who are in positions where, for much of the time, it is impossible to maintain direct and close supervision of their work. In my view Mr Rose shattered that confidence by acting in a totally inappropriate and unprofessional manner which also reflected poorly on Telstra." [Exhibit R4, paragraph 16]
I also note that in paragraph 24 of this statement Mr Lambert states:
"The incident reflects back on other individuals, the staff members who work in that particular area, and also back on the Company as a whole. The public will see that and I feel it has brought discredit on the Company. I do not believe the incident promoted business success, which is one of Telstra's key company values." [Exhibit R4, paragraph 24]
Mr Lambert is the Service Delivery manager for the mid-coast area of NSW for Telstra. At the time of the incident which gave rise to these proceedings he was the Service Delivery Manager of the Oxley Service Delivery Area which incorporated the Tamworth and Armidale areas.
In determining whether a termination was `harsh, unjust or unreasonable' the Commission must have regard to the matters identified in s.170CG(3), namely:
"(a) whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service; and
(b) whether the employee was notified of that reason; and
(c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and
(d) if the termination related to unsatisfactory performance by the employee-whether the employee had been warned about that unsatisfactory performance before the termination; and
(e) any other matters that the Commission considers relevant."
In Byrne v Australian Airlines1 the High Court considered the meaning of the expression `harsh, unjust or unreasonable' in the context of clause 11(a) of the Transport Workers (Airlines) Award 1988. That clause provided:
"Termination of employment by an employer shall not be harsh, unjust or unreasonable. For the purposes of this clause, termination of employment shall include terminations with or without notice."
In their joint judgment of McHugh and Gummow JJ said, at 465-468:
"It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted. ...
Procedures adopted in carrying out the termination might properly be taken into account in determining whether the termination thus produced was harsh, unjust or unreasonable. The submissions for the respondent in the present appeals appeared to concede this. But the burden of the respondent's submissions is that there was error in determining the issue without regard to the very material circumstance of the finding of the primary judge as to the complicity of the appellants in pilfering. Those submissions should be accepted. This means that the primary judge was bound to consider whether, on the evidence given at the trial, the respondent could resist the allegation of breach of cl 11(a), provided that the evidence concerned circumstances in existence when the decision to terminate employment was made."
Given that the observations in the joint judgment were made in a different context they are not binding2, but I find them highly persuasive. In my view, for the purpose of s.170CG, a termination of employment 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 misconduct;
· unjust, because the employee was not guilty of the misconduct on which the employer acted; and/or
· unreasonable, because it was decided on inferences which would not reasonably have been drawn from the material before the employer.
In Windsor Smith v Liu and others3 a Full Bench of the Commission said:
"Under the Workplace Relations Act 1996 the principal question is whether the termination was harsh, unjust or unreasonable. In considering that question the Commission is to ensure that a "fair go all round" is accorded to both the employer and the employee concerned."
The expression `a fair go all round' appears in s.170CA(2). Section 170CA sets out the objects of Division 3 of Part VIA of the Act. In the context of a s.170CG arbitration it is relevant to note that s.170CA(1)(b) states that one of the objects of the Division is `to provide, if the conciliation process is unsuccessful, for recourse to arbitration or to a court depending on the grounds on which the conciliation was sought'. Section 1270CA(2) provides:
"The procedures and remedies referred to in paragraphs (1)(a) and (b), and in the manner of deciding on and working out such remedies, are intended to ensure that, in the consideration of an application in respect of a termination of employment, a `fair go all round' is accorded to both the employer and employee concerned."
In my view whether there has been a `fair go all round' is a matter which I think is relevant and hence I am to have regard to it determining whether the termination was harsh, unjust or unreasonable. It is not necessarily determinative4 but it is a factor to be taken into account.
In relation to the matters identified in s.170CG(3) it is agreed that the applicant was terminated because of his conduct during the incident on 14 November 1997 and that he was notified of the reason for his termination. It is also conceded that the applicant was given an opportunity to respond to the reason given for his termination. It follows that I need not dwell on the matters identified in paragraphs 170CG(3)(b), (c) or (d).
The central issue in the determination of this matter is whether there was a valid reason for Mr Rose's termination related to his conduct during the incident on 14 November 1997. The issue in question is the extent to which an employee's conduct outside of their working hours can provide a valid reason for their termination.
In considering the extent to which out of work conduct may constitute a valid reason for termination it is important to recognise that the legal basis of the employment relationship has changed over time. The origins of the Anglo-Australian contract of employment has been summarised by Selznick in the following terms:
"The law of master and servant was rooted in a society in which everyone was presumed to belong somewhere, and the great parameters of belonging were kinship, locality, religion, occupation, and social class. In all spheres of life, including spiritual communion, subordination to legitimate authority was thought to be a natural, inevitable, and even welcome accompaniment of moral grace and practical virtue.
The old law of master and servant looked to the household as a model and saw in its just governance the foundations of orderly society. The household model made sense in an overwhelmingly agricultural economy where hired labour, largely permanent, supplemented the work of family members and all were subject to the authority and tutelage of the father-manager. The model also fit [sic] the early pattern of work and training among skilled artisans. In this setting, the relation of master and servant was highly diffuse and paternalistic. Work was carried out in the house of the master or in a small shop nearby. The workman lived as a member of the household and often remained for life with the same master. It was against this background that the law of master and servant developed."5
The form and content of the `law of master and servant' to which Selznick refers was greatly influenced by a series of legislative measures which became known as the Master and Servant Acts6. The law originated in the 14th century when wage labour made its first general appearance and the legislators were trying to find a way of fitting this new contractual relationship into the still prevalent pattern of unfree serf labour. The outcome was the Statute of Labourers of 1349 which provided, among other things, that every able-bodied man or woman under sixty without income from property or merchandise could be compelled to work for whatever master required their services. A succession of similar statutes were enacted throughout the latter part of the 14th and 15th centuries; these were then repealed and the whole law restated in the 1563 Statute of Artificers. Its basis was still legal compulsion to labour for those without property. It also provided that no servant was to leave his parish without a testimonial from his master that he was licensed to depart, otherwise he would be whipped and imprisoned.
The old law of master and servant recognised that the master had extensive powers of discipline over his servants - including the administering of corporal punishment. As Lord Holt observed in 1697 in R v Keite:
"If a master gives correction to his servant, it ought to be with a proper instrument, as a cudgel, etc. And then if by accident a blow give death, this would be but manslaughter."7
This kind of reasoning reflected an era when the relationship between the master and servant was regarded as an extension of that between the `paterfamilias' and the individual member of the family unit.
As Sir Henry Maine observed the employment relationship at that time was one of status which `derived from, and to some extent still coloured by, the powers and privileges anciently residing in the family'.8
But the common law of employment has changed over time. The emergence of the modern law of employment can be seen as a movement from status to contract.9
As McHugh and Gummow JJ observed in Byrne v Australian Airlines:
"The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee)."10
The shift in the nature of the employment relationship has implications for an employer's capacity to discipline an employee in respect of out of work conduct. In earlier times the relationship of master and servant was pervasive. The master controlled many aspects of the servant's life, including the capacity to travel outside of their parish. As I have noted the relationship was regarded as an extension of the family unit, with the master as head of the family.
But this is no longer the case. The modern law of employment has its basis on contract not status. An employee's behaviour outside of working hours will only have an impact on their employment to the extent that it can be said to breach an express or implied term of his or her contract of employment.
The consequent limitations on an employer's right to discipline an employee in respect of out of hours misconduct is most clearly illustrated by the High Court's decision in Commissioner for Railways (NSW) v O'Donnell11. In that case the Court held that the fact that an employee had been arrested and charged with an offence did not of itself constitute misconduct warranting termination of employment.
Nor is the conviction of a criminal offence, of itself, sufficient to warrant termination. The misconduct in question must have a relevant connection to the employment. For example in HEF of Australia v Western Hospital Lawrence DP observed:
"The conviction of an individual for a criminal offence does not necessarily have any effect upon that person's employment The question of the relevance of a conviction or an employee's alleged misbehaviour to the employee's work should be considered in terms of whether or not the employee has breached an express or implied term of his or her contract of employment. Whether events occurring outside the actual performance of work will be relevant to the employment relationship will vary from case to case. For example, an accountant who has committed an act of dishonesty (for which he may have been charged and convicted) in the course of some activity outside his employment might be said to have breached a term of his contract of employment."12
However if attendance at work for a significant period is precluded because an employee has been convicted of a serious offence and imprisoned, then the contract of employment may be brought to an end by the operation of law due to frustration.13
Depending on the circumstances a conviction for a criminal offence arising from out of work activities may lead to termination. In Hussein v Westpac Banking Corporation Staindl JR expressed the following view:
"... a conviction on a drink-driving charge which occurred outside work hours would not be relevant to the employment of many people. However it would be of critical relevance to a truck driver or taxi driver. It seems to me that an appropriate test is whether or not the conduct has a relevant connection to the employment."14
In that case the employee was convicted of credit card fraud in relation to activities outside his work. He was employed at Westpac as a migrant liaison officer, in particular, giving advice to members of the Turkish community. The court held that there was a sufficient connection between his work with Westpac and the conviction for credit card fraud on another bank. He was in a position of responsibility, honesty and trust. In those circumstances, his conduct was sufficient to justify the dismissal.
In certain circumstances an employee's out of work activities may be in breach of an implied or explicit term of their employment contract. An employee's implied duty of fidelity and good faith is particularly relevant here.15 One of the most concise and authoritative statements of what is generally encompassed by the duty of fidelity and good faith is to be found in Blyth Chemicals v Bushnells16. In that case their Honours 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 of dismissal ... But the conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to future conduct arises."17
In the same case their Honours Starke and Evatt JJ note:
"The mere apprehension that an employee will act in a manner incompatible with the due and faithful performance of his duty affords no ground for dismissing him; he must be guilty of some conduct in itself incompatible with his duty and the confidential relation between himself and his employer."18
The concept of a duty of fidelity and good faith is used as a matter of convenience to subsume a range of obligations which are intended to ensure that the employee renders honest and faithful service to the employer. They include:
- an obligation not to damage the employer's interests by disclosing or using confidential information obtained in the course of employment;19
- an obligation to act honestly in handling the employer's property;20
- an obligation not to earn any secret profits;21 and
- an obligation not to engage in employment outside of the hours devoted to their main job where the spare time work is for a competitor of the main employer and may damage the employer's business.22
The obligations imposed by the common law duty of fidelity and good faith operate to prohibit acts outside of the employment which are inconsistent with the continuation of the employment relationship. But as Spender AJ observed in Cementaid (NSW) Pty Ltd v Chambers23, `an actual repugnance between the employee's acts and his relationship with his employer must be found'.24
More recently the implied term of fidelity and good faith has been expressed as an obligation to serve the employer loyally and not to act contrary to the employer's interest. In England this obligation appears to have been subsumed by the more general obligation of mutual trust and confidence.25 The implied term of mutual trust and confidence imposes reciprocal duties on the employee and employer that they shall not `without reasonable and proper cause, conduct themselves in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee'.26
If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee then a breach of the implied obligation may arise.27
There is some support for the proposition that the existence of an implied term of trust and confidence in contracts of employment has been accepted in Australia.28
The words `trust and confidence' in this context are used in a contractual sense rather than as an ingredient of a personal relationship. As McCarry notes:
"... the words `trust and confidence', just like the employee's reciprocal duties of `fidelity and good faith', do not now refer to the ingredients of a personal relationship, even if they once did. The words now represent, in shorthand form, a bundle of legal rights which have more to do with modes of behaviour which allow work to proceed in a commercially and legally correct manner than with ingredients in an interpersonal relationship."29
The above statement is consistent with the shift in the nature of the employment relationship, from status to contract, referred to earlier.
It is clear that in certain circumstances an employee's employment may be validly terminated because of out of hours conduct. But such circumstances are limited,:
· the conduct must be such that, viewed objectively, it is likely to cause serious damage to the relationship between the employer and employee; or
· the conduct damages the employer's interests; or
· the conduct is incompatible with the employee's duty as an employee.
In essence the conduct complained of must be of such gravity or importance as to indicate a rejection or repudiation of the employment contract by the employee.30
Absent such considerations an employer has no right to control or regulate an employee's out of hours conduct. In this regard I agree with the following observation of Finn J in McManus v Scott-Charlton:
"I am mindful of the caution that should be exercised when any extension is made to the supervision allowed an employer over the private activities of an employee. It needs to be carefully contained and fully justified."31
A number of Australian cases have dealt with the question of whether an employee's out of work behaviour warranted termination. But in my view each of these cases falls within the circumstances identified above.
In McManus v Scott-Charlton32 Finn J concluded that it was lawful for an employer to give an employee a direction to prevent the repetition of privately engaged-in sexual harassment of a co-employee where:
"(i) that harassment can reasonably be said to be a consequence of the relationship of the parties as co-employees (ie it is employment related); and
(ii) the harassment has had and continues to have substantial and adverse effects on workplace relations, workplace performance and/or the "efficient equitable and proper conduct" (cf PS Act, s6) of the employer's business because of the proximity of the harasser and the harassed person in the workplace."33
It is important to recognise that the lawfulness of the direction given by the employer was dependent on the fact that the employee's out of work conduct had a demonstrated, substantial and adverse effect on the employer's business.
In R v Railways Appeal Board; Ex parte Haran34 the Full Court of the Supreme Court of WA held that an employer had power to dismiss an employee for misconduct when `off duty'. In that case James Haran had been employed by the Railways Commission as a porter at Perth station. In May 1967 he struck a fellow employee at the station, while on-duty, and for this he was fined $10 by the Commission and warned that if he again came under notice for a complaint of that nature, consideration would be given to the termination of his services. On 2 December 1967, while off-duty, Mr Haran returned to the station and assaulted the assistant station master and another officer. He was charged with behaving in a violent and offensive manner to the annoyance of others on railway premises under s.45(5) of the Government Railways Act 1904. The charge was heard in the Court of Petty Sessions on 4 December and he was convicted. On the same day he was dismissed from his employment. It should also be noted that in the course of his judgment Wolff CJ observed that the offence which Mr Haran was convicted of `vitally affects the management and conduct of the railways'.35
In both McManus and Haran the employee's out of hours conduct damaged the employer's interests.
An employee's out of hours conduct may also cause serious damage to their relationship with their employer. In Wall v Westcott Watson J held that an employee having an affair with his employer's wife as revenge or as an affront to the employer in a small community constituted misconduct justifying dismissal. His Honour said:
"... I would have little hesitation on the evidence relevant to this issue in deciding that, with the admitted intention of the respondent to seek revenge in the way he did, the misconduct was both serious and wilful. This is not a moral view. It was a serious and very much intended affront to an employer in a relatively small community."36
It is important to recognise that the behaviour of the applicant in that case constituted serious and wilful misconduct not because the tribunal felt that it was immoral and warranted a penalty, but because it was `a serious and very much intended affront to an employer in a relatively small community'. On this basis the case clearly falls within the limited circumstances I have identified. The applicant's conduct was clearly likely to cause serious damage to the relationship between the employer and employee.
The position which an employee occupies may also impact on the extent to which misconduct in his or her private life can be said to impact on their employment. In Henry v Ryan37 a police officer found loitering in the grounds of a girls school while off duty and wearing only his underpants was guilty of misconduct and terminated. In the course of his judgment Burbury CJ said:
"Many of the powers of a police officer are exercised by him by virtue of the independent public office he holds and cannot be exercised on the responsibility of any person but himself. His duties are of a public nature and over a wide range of matters affecting the public he exercises original and not delegated authority ... Discreditable conduct in his private life may therefore clearly affect his status and authority as a police officer in the discharge of his public duties and in his relations with the public.
Misconduct in his private life by a person discharging public or professional duties may be destructive of his authority and influence and thus unfit him to continue in his office or profession."38
In Allan v Commissioner of Australian Federal Police Neaves J expressed the view that `conduct which amounts to a breach of the criminal law will in many cases of its very nature be conduct that would be regarded as disgraceful and improper if engaged in by a police officer'.39
In this context it is important to note that Courts have often observed that members of police forces are engaged in a very distinctive form of public service.40 The discipline expected of, and extracted from, police officers reflects the particular public character and importance of policing and police duties.
In Police Service Board v Morris Brennan J commented on the significance of police discipline in this way:
"The effectiveness of the police in protecting the community rests heavily upon the community's confidence in the integrity of the members of the police force, upon their assiduous performance of duty and upon the judicious exercise of their powers. Internal disciplinary authority over members of the police force is a means - the primary and usual means - of ensuring that individual police officers do not jeopardise public confidence by their conduct, nor neglect the performance of their police duty, nor abuse their powers. The purpose of police discipline is the maintenance of public confidence in the police force, of the self-esteem of police officers and of efficiency."41
In Orr v The University of Tasmania42 the Court held that the respondent was entitled to terminate the employment of a professor who had an affair with one of his students on the basis that his conduct had rendered him unfit to perform his duties. The fact that Professor Orr was engaging in a sexual relationship with one of his students made it impossible for him to dispassionately carry out his duties of examining and presenting candidates for their degrees.
Similarly in In re Wearne43 the English Court of Appeal held that a solicitor could properly be struck off the roll in the exercise of the Court's disciplinary powers over its officer where he was convicted of allowing a house of which he was the landlord to be used as a brothel.
Off duty behaviour may also render a teacher liable to dismissal. In R v Teachers Appeal Board; Ex parte Bilney44 the teacher in question was held to have been guilty of at least improper conduct in cultivating Indian hemp contrary to the law and after a previous conviction for the same offence. But not every private impropriety by a teacher will be serious enough to warrant termination. In Re F45 it was held that it was too harsh a punishment to remove from the register the name of a teacher with an otherwise good record who had, while off duty, exposed himself to two female hitch-hikers (neither of whom were students) at a time when he was undergoing marital difficulties.
In Bercove v Hermes the Federal Court concluded that it was open to a Disciplinary Appeals Board to conclude that a public servant was guilty of `improper conduct' within the meaning of s.55 of the Public Service Act 1922 (Cth) in circumstances where he had actively engaged in the operation of an escort agency likely to be perceived as unsavoury by the general public and had taken certain actions in connection with companies engaged in tax avoidance or evasion. The public servant in question was a solicitor employed as a senior legal officer in the office of the Deputy Crown Solicitor at Perth.46
In each of the cases referred to there was a clear connection between the employee's out of hours conduct and their employment. The conduct was incompatible with the employee's duty as an employee or was likely to cause serious damage to the employment relationship.
In support of its submission that there was a valid reason for Mr Rose's termination in this case, the respondent relied on four cases in which it was concluded that off duty misconduct justified termination:
· In re Dispute - Transfield Pty Ltd Re: Dismissal of Union Delegate47
· AWU-FIME Amalgamated Union v Queensland Alumina Limited48
· Australian Workers Union (WA Branch) v Goldsworthy Mining Ltd49
· North Australian Workers' Union v Newcastle Protective Clothing Pty Ltd50
In my view the cases relied on are clearly distinguishable from the matter before me.
In the Transfield case a union delegate, Mr Turner, employed by Transfield at the Wallerawang Power Station construction site was dismissed for assaulting a foreman at a hotel after work. In the course of his decision Sheehy J found that the applicant `did seek out the foreman in order to accost him about the current dispute on the site and that when Mr Giust would not listen to him he knocked him down'.51 The assault took place at a hotel where it was customary for workers from the Wallerawang Power Station site to gather. Sheehy J went on to make the following observation in relation to the connection between the assault and Mr Turner's employment:
"I consider that it would have become generally known at the site that the foreman had been attacked by the Union delegate and in the circumstances I consider that this would tend to undermine his authority and that of management. It would also lead to fear on the part of Mr Giust and other foremen that there could be further assaults on them unless the strongest measures were taken against Mr Turner ... I would regard it as unsafe for the Company to continue to employ Mr Turner, in the sense that his presence on the site could embarrass Mr Giust and other foremen in the execution of their duties and give rise to a situation where the authority of management could be eroded."52
The employee's conduct in this case had damaged the employee's interests by significantly undermining management's authority.
In AWU-FIME Amalgamated Union v Queensland Alumina Limited53 Moore J concluded that the respondent had a valid reason for terminating the employment of two employees for fighting in the crib room at the workplace, in breach of company policy. In the course of his judgment his Honour said, at 392-393:
"Witnesses called by QAL conceded that in that working environment tensions can arise between members of the workforce. I accept, however, that it is important to QAL both in its interests and the interests of the workforce to ensure that fighting does not occur at the workplace. This is obviously so in areas where plant is located. The Union made the point that the fight occurred in the drib room which can, as it characterised it, be described as a sanctuary from the workplace.
However the policy of QAL would lose much of its effectiveness if it was to be subject to a qualification that while fighting could not occur in the vicinity of operating plant, it would not view as serious fights occurring elsewhere. The purpose of the policy appears to be twofold. The first is to avoid situations where employees might injure themselves, for example, as a result of losing complete control of movement by being pushed or shoved while fighting in a dangerous working environment. The second is to ensure that employees exercise a measure of discipline when responding to tensions that might arise with other members of the workforce. While fighting may, in some instances, have a cathartic effect it can also heighten tensions and lead to situations where trust and cooperation is lost entirely. In my opinion QAL was entitled to both adopt and give effect to a policy that prohibited fighting with the sanction of dismissal if it was breached. QAL's need to maintain the integrity of the policy constituted, in the circumstances, a valid reason for the termination of both Merritt's and Sonter's employment."
In my view his Honour's judgment is directed at circumstances where employees engage in fighting at work.
In the Goldsworthy Mining case Commissioner Martin refused to reinstate `M' a plant officer who had been dismissed for creating a disturbance in the mess, behaving in an aggressive manner, being abusive to mess workers and taking `physical action' against a cook. It is not clear from the report of the decision whether `M' had been on duty at the relevant time, but it would seem that the assault of the cook took place on the employer's premises.
In the Newcastle Protective Coating Pty Ltd case five employees were dismissed without notice for misconduct. The matter was referred to a Local Industrial Board for investigation and report. The decision of Commissioner Portus was in relation to that report. The misconduct involved the action of employees while occupying the accommodation quarters provided by the Groote Eylandt Mining Company at Groote Eylandt. Newcastle Protective Coating Pty Ltd was a contractor carrying out certain work for the mining company at Groote Eylandt and the arrangement was that the employees of the contractor or use the accommodation provided by the mining company for employees during such time as they remain employees. The dismissed employees had entered into signed agreements with their employer with regard to the contemplated employment on Groote Eylandt. The relevant agreements contained the following clause:
"I have been issued with a copy of the camp occupancy rules as determined by Groote Eylandt Mining Company Pty Ltd. I have perused such rules and agree to abide by the conditions therein contained."
One of the provisions of the camp occupancy rules was in the following terms:
"Occupants must use the accommodation equipment and facilities with care and with consideration for others and shall not do anything which may be noxious, offensive, noisome, or a nuisance to other occupiers or which may cause a disturbance."
The precise form of the misconduct in this case is not set out in the decision. However an extract from the finding of the Chairman of the Local Industrial Board who dealt with the matter at first instance was set out in the decision and relevantly provides:
"4. I feel that in this matter the misconduct reported would not in itself warrant dismissal and removal from the island, but the blatant refusal to accept the repeated instructions or requests from the camp authorities created an explosive situation in which prompt and decisive action was essential"
In the course of his decision Commissioner Portus said:
"Misconduct in the normal course concerns conduct on the job and not conduct of the employee away from the job, but this is not the case where the employee's conduct occurs in accommodation quarters provided by the employer as part of the contract of employment. Similarly in this case misconduct can extend to conduct in accommodation provided not by the employer but by a third party under arrangement with the employer. In this case it was made clear to the employees in their contract of employment that their duties extended to proper use of the accommodation facilities.
... I find that the five employees were properly dismissed from their employment. Their actions were directly related to a term of their contract of employment. Furthermore it was a reasonable term to include in the contract particularly when one bears in mind that Groote Eylandt is an aboriginal reserve."54
The circumstances in the Newcastle Protective Coating Pty Ltd case and the matter before me are quite different, in particular:
- the relevant contracts of employment contained a term which made it clear to the employees that their duties extended to the proper use of the accommodation facilities;
- the employees concerned refused to accept repeated instructions from camp authorities which created an explosive situation which made prompt and decisive action; and
- the accommodation used by the employees was provided by a third party under an arrangement with their employer whereby the employer was required to ensure that the camp rules were known to the employees and were strictly obeyed.
None of these factors is present in the matter before me.
In my view the applicant's conduct on 14 November 1997 lacked the requisite connection to his employment and therefore did not provide a valid reason for his termination.
The incident in question took place outside of working hours. At the relevant time neither Mr Rose nor Mr Mitchell were in their Telstra uniforms. Nor were they `on-call'. The incident did not take place in what could be regarded as a public place but rather inside the Hotel room that the applicant shared with Mr Mitchell.
According to Mr Lambert the applicant's conduct tarnished the public perception of Telstra employees and discredited the Company. In my view there is simply no evidence of any substance to support such a conclusion.
I do not think that there was a reasonable basis for concluding that Mr Rose's conduct had damaged his employer's interests. The evidence of any publicity as a result of the incident is scant. A court listing in respect of the criminal charges against Mr Mitchell appeared in the local paper but it was not suggested that the notice identified the accused as a Telstra employee. None of the witnesses were aware of anything else appearing in the local paper. The owner of the St Kilda Hotel was aware that Messrs Rose and Mitchell were Telstra employees. But the Hotel owner was not called to give evidence. It is not known if he holds Telstra responsible in any way for the conduct of Messrs Rose and Mitchell or if he thinks any less of Telstra as a result of the incident.
Mr Warhurst said that his sister and brother-in-law reside in Tamworth and they were aware of the incident. On this basis he concluded that `there obviously were rumours around'. No other evidence was advanced in support of such a conclusion.
Further I do not accept that the applicant's conduct viewed objectively, was likely to cause serious damage to his relationship with his employer. In this regard I note that during the course of his evidence Mr Warhurst acknowledged that Mr Rose had been a good employee and that he had no concerns with his conduct as an employee.
I do not doubt that the applicant's behaviour on 14 November 1997 was foolish and an error of judgment. He made a mistake. But employers do not have an unfettered right to sit in judgment on the out of work behaviour of their employees. An employee is entitled to a private life. The circumstances in which an employee may be validly terminated because of their conduct outside work are limited. The facts of this case do not fall within those limited circumstances.
The respondent did not have a valid reason to terminate Mr Rose's employment.
I have concluded that the termination of Mr Rose's employment because of his conduct in relation to the 14 November 1997 incident was harsh. In arriving at this conclusion I have had regard to the matters identified in s.170CG(3). I have not considered it necessary to deal with the two alternative submissions advanced on behalf of the applicant and I have not taken them into account in arriving at my decision.
I have determined that the termination of Mr Rose's employment by Telstra was harsh.
Given the nature of some of the evidence led in the proceedings the parties requested that I only determine whether the termination was harsh, unjust or unreasonable at this stage. The question of whether a remedy should be provided and if so the form of such a remedy will be the subject of further proceedings. I am content to adopt this course.
This matter will be relisted for mention and programming by telephone conference in the near future.
In the meantime I urge the parties to meet and confer with a view to settling this matter.
BY THE COMMISSION:
D. Dwyer for the applicant.
C. Gardner for the respondent.
Termination of employment - unfair dismissal - arbitration - termination followed fight with another employee in hotel room outside working hours - no concern expressed about applicant's work performance - reason for termination notified and opportunity to respond provided - whether valid reason for termination - employee's actions outside working hours affect continuing employment only to extent that such activity breaches implied or express term of employment contract - authorities considered - employee's out of hours conduct may trigger termination when the conduct is of such gravity or importance as to indicate a rejection or repudiation of the employment contract and is likely to seriously damage the employer/employee relationship or damages the employer's interests or is incompatible with employee's duty as an employee - no evidence that conduct tarnished public perception of company or discredited its reputation - can't reasonably conclude employer's interests damaged - not satisfied applicant's conduct damaged relationship with employer - conduct lacked requisite connection with work to provide valid reason for termination - no valid reason for termination - for s170CG purposes termination may be harsh or unjust or unreasonable - termination harsh - parties requested no remedy be determined - matter to be relisted concerning remedy.
Rose v Telstra Corporation Limited
U No 20564 of 1998
4 December 1998
Printed by authority of the Commonwealth Government Printer
<Price code F>
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1 (1995) 185 CLR 410.
2 At p. 467 of the joint judgment their Honours said: `... it should be emphasised that the present task is to construe the Award and that nothing now said necessarily determines the meaning of the phrase `harsh, unjust or unreasonable' in any other setting'.
3 Unreported, AIRC, per Giudice P, Polites SDP and Gay C, 13 July 1998, Print Q3462.
4 Banh v Bridgestone TG Australia Pty Ltd, unreported, AIRC, per McIntyre VP, Duncan DP and Jones C, 27 July 1998, Print Q4039.
5 Selznick P, Law, Society and Industrial Justice (New York: Russell Sage Foundation, 1969) at 123. See also Fox A, Beyond Contract: Work, Power and Trust Relations, (London: Faber, 1974).
6 See generally Simon D, "Master and Servant" in Saville J (ed), Democracy and the Labour Movement (London: Lawrence and Wishart, 1954) at 160-220; and Creighton WB, Ford WJ and Mitchell RJ, Labour Law Text and Materials (Law Book Company, 1993) at 17-32.
7 (1697) 1 Ld Raym 138 at 144; 91 ER 989 at 992.
8 Maine HS, Ancient Law (London: John Murray, 1927).
9 See Kahn-Freund O, "Blackstone's Neglected Child: The Contract of Employment" (1977) 93 Law Quarterly Review 508 at 512.
10 (1995) 185 CLR 410 at 436. See further: Attorney-General (NSW) v Perpetual Trustee Co. Ltd (1955) 92 CLR 113 at 122-123;  AC 457 at 482-483; Wilson v Racher  ICR 428 at 430 per Edmund Davies LJ.
11 Commissioner for Railways (NSW) v O'Donnell (1938) 60 CLR 681 at 689 per Rich J, 691-692 per Dixon J and 698 per McTiernan J.
12 (1991) 4 VIR 310 at 324. Cited with approval by Staindl JR in Hussein v Westpac Banking Corporation (1995) 59 IR 103.
13 F.C. Shepherd & Co Ltd v Jerrom  ICR 802.
14 (1995) 59 IR 103 at 107
15 Robb v Green  2 QB 315 at 317 per Lord Esher M.R.
16 (1933) 49 CLR 66.
17 Ibid at 81-82.
18 Ibid at 74.
19 Faccenda Chicken Ltd v Fowler  1 All ER 617.
20 W.D. & H.O. Wills v Jamieson  AR (NSW) 547; Sinclair v Neighbour  2 QB 279.
21 Boston Deep Sea Fishing Co. v Ansell (1888) 39 ChD 339.
22 Daily Cleaning Service v Pavlovic (1992) 34 AILR 359.
23 NSW Supreme Court, unreported, 29 March 1995.
24 Ibid at 6.
25 Malik v Bank of Credit and Commerce International S.A. (In Compulsory Liquidation)  3 WLR 95 at 109 per Lord Steyn.
26 Ibid and see further: Woods v W.M. Car Services (Peterborough) Ltd  ICR 666; Lewis v Motorworld Garages Ltd  ICR 157; Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd  1 WLR 589.
27 Malik's case, op cit, at 111 per Lord Steyn.
28 In Burazin v Blacktown City Guardian Pty Limited (1996-97) 142 ALR 144 at 151 a Full Court of the Industrial Relations Court accepted the existence of such a term on the basis of the `ample English authority'. See also: Jager v Australian National Hotels Pty Limited, unreported 12 May 1998 per Slicer J, Supreme Court of Tasmania. The rationale for the implication of such a term in the Australian context has not yet been considered, see: McCarry G, "Damages for Breach of the Employer's Implied Duty of Trust and Confidence" in (April 1998) 26(2) Australian Business Law Review, at 141-146.
29 McCarry G., `Damages for Breach of the Employer's Implied Duty of Trust and Confidence', in (April 1998) 26(2) Australian Business Law Review, at 141-146 at 145.
30 Laws v London Chronicle (Indicator Newspapers) Ltd  2 All ER 285; applied in North v Television Corporation Ltd (1976) 11 ALR 599.
31 (1996) 140 ALR 625 at 636.
33 Ibid at 637.
34  WAR 13.
35 Ibid at 15.
36 (1982) 1 IR 252 at 256.
37  Tas SR 90.
38 Ibid at 91.
39 (1983) 5 IR 185 at 187.
40 See Pense v Henry  WAR 40 at 42; and Public Service Board v Morris (1985) 156 CLR 397 at 404 per Gibbs J and at 408-409 per Wilson and Dawson JJ.
41 (1985) 156 CLR 397 at 412.
42 (1957) 100 CLR 526.
43  2 QB 439.
44 (1983-1984) 6 IR 476. It should be noted that the Court in Bilney's case was concerned with whether the teacher's conduct could be characterized as `any disgraceful or improper conduct' within the meaning of s.26(1)(e) of the Education Act 1972 (SA).
45 (1979) 5 QL 236.
46 (1983) 74 FLR 315.
47  AR 596. Cited in Perez and Naumovski v Extruded Metals Pty Ltd, unreported, 30 March 1995 per Fleming JR.
48 (1995) 62 IR 385.
49 (1978) AILR 19.
50 (1971) 139 CAR 707.
51  AR(NSW) 596 at 599
53 (1995) 62 IR 385.
54 CAR 707 at 707-708.