Summary dismissal: how to comply with the rules

Two questions in the Small Business Fair Dismissal Code checklist refer to summary dismissal for serious misconduct. There must be “reasonable grounds” for dismissal in order to comply. This article discusses “reasonable grounds” and “serious misconduct”?  

The code applies to small businesses with fewer than 15 employees. The total comprises “a simple headcount of all employees, including casual employees employed on a regular and systematic basis”. It includes the dismissed employee. 

It is a brief document with a checklist of 10 questions. It is not mandatory to complete and sign the checklist, however, it is strongly recommended to do so at the time of dismissing the employee. If a claim of unfair dismissal later arises, the employer will have to provide proof of compliance with the code. The code is not a guarantee of protection against a claim of unfair dismissal, but compliance with it will be strongly taken into account when determining a claim, and, in any case, it is a best practice guide to complying with the law. 

A previous article provided an overview of the code, whom it covers, and its legal force. 

What the code says about summary dismissal 

Question 4 of the code asks if the employer dismissed the employee because it believed “on reasonable grounds” that the employee: 

• was stealing from the business 
• defrauded the business 
• threatened employees or clients with violence, or actually committed violence at the workplace 
• committed a serious breach of occupational health and safety procedures. 

Question 5 asks if the employer dismissed the employee for some other form of serious misconduct, and requires the employer to specify the reason. 

The code says that “for a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police.” Therefore, the employer should keep documents that prove a report was made. 

If the employee makes a claim of unfair dismissal, the Fair Work Commission (FWC) must determine whether the employer, if it had fewer than 15 employees, complied with the code. It may look for evidence that the employer did have “reasonable grounds” for the dismissal. If so, the employer will not only have to justify the dismissal itself, but also the decision to make an on-the-spot dismissal rather than termination of employment with notice or payment in lieu of it. 

What the law says 

The Fair Work Regulations define serious misconduct as including both: 

• wilful or deliberate behaviour that is inconsistent with the continuation of the contract of employment 
• conduct that causes imminent and serious risk to the health and safety of other people or the reputation, profitability, or viability of the employer’s business.

The regulations add that serious misconduct may include: 

• theft 
• fraud
• assault 
• being intoxicated at work 
• refusing to carry out an employer’s lawful and reasonable instruction that is consistent with the contract of employment. 

“Intoxicated” is further defined to mean “the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform.”  

Note that the regulations do not provide an exhaustive list of situations that may justify summary dismissal. Tribunals have found other examples where summary dismissal was justified in the circumstances. These could include bullying, misusing confidential information, misusing email or the internet/social media, misconduct outside the workplace that is job-related, abusive behaviour including offensive language, or committing a criminal offence.

Some of these could fall within the scope of “refusing to follow a lawful and reasonable instruction (ie that the employee comply with a policy or rule)”, and in some cases the individual circumstances would affect whether summary dismissal or dismissal with notice was more appropriate. 

The regulations also provide that summary dismissal will not be justified where the employee can prove that their conduct was not of such a nature that continued employment during the notice period for termination of employment was unreasonable. 

Given the open-ended nature of Q5, it is a fair assumption that everything quoted in this section of the regulations would fall within the scope of the code. 

What “reasonable grounds” means 

An employer must have a “valid reason” for dismissing an employee that is related to the employee’s job performance, conduct, or work capacity. In practice, “reasonable grounds” means having a high standard of objective proof, given both the “instantaneous” nature of the dismissal and the fact that evidence will be required if a claim of unfair dismissal arises. Signing the code’s declaration is not simply a box-ticking exercise, if challenged the business must be able to justify its actions. 

Sources of proof include the following: 

• For one-off incidents such as violence or intoxication, clear signed statements from victims and independent witnesses. 
• Evidence of theft could include shortages in cash register takings, accounting anomalies, inventory reports, and witness reports of property being physically removed. 
• Footage from cameras and other security/surveillance devices at the workplace. 
• If there is a suspicion of an ongoing pattern of theft or other misconduct, the employer could conduct a series of investigations, but should use trained security staff where possible and record written observations. “Amateur sleuthing” that attempts to catch employees by setting deliberate traps or interviews that are “fishing expeditions” may not be acceptable evidence.  
• In cases of failure to comply with a lawful and reasonable instruction, there needs to be evidence of both the instruction being issued and the employee refusing to comply with it. 

Other points 

• Be careful not to link an employee’s conduct with subsequent losses to the business unless it is very clear that the conduct directly led to the losses and there were no other factors that also contributed to them. 
• Even in cases of summary dismissal, you should put the allegations to the employee and give them an opportunity to respond before you implement the dismissal. Take into account any mitigating circumstances and allow the employee to have a support person present. The only exceptions would be where this is impractical, eg the employee is absent from the workplace and cannot be contacted. 

Again, these points apply to all employers, whether covered by the Small Business Fair Dismissal Code or not.