Sacking leads to a significant payout

In brief 3 min read

In a decision showing the importance of not jumping to conclusions, a senior employee was awarded $276,681 in damages after his contract was terminated for alleged serious misconduct – just one working day before he would have been entitled to a redundancy payment.

Key takeaways

If seeking to terminate an employment contract for serious misconduct, it is important to:

• avoid jumping to conclusions and pre-judging an outcome when investigating allegations of misconduct;
• demonstrate that a thorough and objective investigation has been conducted; and
• demonstrate that the employee has been given sufficient opportunity to respond to allegations of serious misconduct.

Background

Mr Sherry was summarily dismissed from his senior position at Toyota Motor Corporation Australia Limited (TMCA) for alleged serious misconduct, one working day before becoming entitled to a significant redundancy payment ($379,268.10 gross). He sought damages against TMCA, arguing that it had repudiated the employment contract.

TMCA argued that Mr Sherry had dishonestly and, in breach of company policies, incurred $1,754.50 in personal expenses on his corporate credit card, largely related to a business trip to Melbourne in 2018.

It sought to justify his summary dismissal on the basis he had committed serious misconduct, on five grounds. That he:

• booked a larger hotel room than was necessary to accommodate his family;
• booked an extra night's accommodation for personal purposes;
• bought a meal for his son on the corporate credit card;
• bought a Telstra dongle service for personal use without TMCA's knowledge or approval; and
• was dishonest when asked about these expenses.

Both parties agreed that if TMCA did not have grounds for Mr Sherry's immediate termination, it had repudiated the contract, entitling him to damages.

The decision

The court accepted that the summary dismissal clause was a condition of Mr Sherry's contract, but held that he had not committed serious misconduct either under the contract or at common law. As a result, he was entitled to a significant award of damages.

It found the evidence of the TMCA employees responsible for conducting the investigation not to be credible, and determined :

• they had failed to make sufficient enquiries into whether Mr Sherry's explanations for the disputed expenses were true;
• they had failed to provide Mr Sherry with an adequate opportunity to respond to allegations made against him; and
• in any event, the TMCA staff conducting the investigation failed to bring an objective mind to the investigation, as they had already pre-judged Mr Sherry as dishonest.

Accordingly, the court concluded that TMCA had not established that Mr Sherry had engaged in serious misconduct, as defined in the written agreement or at common law, to justify his termination, and had intended to terminate his employment to avoid payment of his redundancy entitlements.