The Federal Circuit and Family Court of Australia has granted a seven-figure compensation package to a former manager for his summary dismissal in 2020. What can employers learn from this ruling?

A former employee of a multinational construction company was recently awarded over $1.5 million in compensation and damages after a summary dismissal which “forever altered” his career path. 

The plaintiff in this case, who was dismissed for alleged misconduct during a bushfire recovery project in July 2020, brought his application to the Federal Circuit and Family Court of Australia earlier this year, nearly four years after the dismissal occurred.

While the Fair Work Commission generally enforces a time limit of 21 days for a person to bring a claim related to unfair dismissal or general protections, breach of contract claims can be filed up to six years after the fact. 

In this case, the plaintiff claimed the employer had acted in breach of the employment contract by failing to give him at least three months’ notice of his dismissal. 

“[This decision] highlights the need for HR to be careful when dismissing an employee, especially in cases of summary dismissal on the basis of misconduct and even if an investigation has taken place,” says Lauren Brouwer-French, Senior Associate at Harmers Workplace Lawyers. 

“The case is an illustration of the potential significant financial consequences of getting it wrong.”

Court finds lack of procedural fairness

At the time of his dismissal, the plaintiff had been employed as a manager on a $400,000-per-year contract, with a total tenure of 17 years at the company. 

The alleged incident that led to his dismissal occurred in July 2020, when he and a number of colleagues were temporarily staying at a property in regional New South Wales during a bushfire recovery project. 

The employee was accused of using “offensive language” towards the owners of the property after they complained about a late-night work party. The employer claimed this had been brought to its attention via a formal complaint from the owners. 

However, the Court’s investigation found no record of such a complaint, despite the show cause letter for the employee’s dismissal stating the complaint was “substantiated”. 

Besides the lack of evidence of serious misconduct, the ruling cited a number of flaws in the employer’s investigation process. It highlighted the lack of clarity around who made the decision and on what basis, the fact that the employee was not provided with a fair opportunity to respond to the allegations prior to his dismissal, and the lack of a thorough and independent investigation.

“A finding of serious misconduct does not necessarily mean summary dismissal is appropriate in all circumstances, or that there will be no risks to an employer for taking that step.” – Lauren Brouwer-French, Senior Associate at Harmers Workplace Lawyers

The absence of a qualified investigator during the dismissal was a significant oversight on the part of the employer, says Brouwer-French.

“In any investigation, HR should appoint an appropriate independent investigator with relevant skills to ensure there is a sound analysis of the allegations and evidence. A non-genuine, sham or flawed investigation will not be sufficient to support a dismissal.”

This is still the case even when there is very sound evidence of serious misconduct, she adds. 

“A finding of serious misconduct does not necessarily mean summary dismissal is appropriate in all circumstances, or that there will be no risks to an employer for taking that step. A summary dismissal may still be considered harsh or unfair depending on the circumstances involved.”

As this case demonstrates, a flawed investigation can come back to bite employers several years after the fact. To avoid this, employers should not only ensure procedural fairness in their investigations, but also maintain clear and thorough records of past investigations. 

“[This includes] copies of letters and emails sent, file notes or recordings of interviews and a clear record of the outcome of the investigation in the event of a later dispute.”

Damages reflect employee’s disrupted career trajectory

The majority of the damages awarded to the employee (about $1.3 million) represented lost income between his dismissal in July 2020 and the court’s ruling on 23 August 2024. 

He was also compensated for incidental costs such as legal fees and relocation costs following the dismissal, as well as around $60,000 for “hurt, distress and humiliation”.

Finally, he was awarded just over $100,000 in compensation for loss of future income. 

In his application, he argued that his employer’s actions disrupted and fundamentally changed his career path. He believed his employment at the company would have continued for another decade or longer, and said the nature of the dismissal impeded his ability to find suitable alternative employment.

In response, the Court considered an array of factors to create a picture of what the applicant’s career would have looked like had he not been wrongfully dismissed.

“In assessing how long the employment relationship would have continued, some relevant factors include the employee’s past performance and employment history, an employee’s length of service, career progression and any previous records of misconduct,” says Amy Zhang, Team Leader and Executive Counsel at Harmers Workplace Lawyers.

In this case, after assessing these factors, the Court found the employee’s record had been “unblemished” prior to the alleged incident, and agreed there was a strong likelihood his employment with the company would have continued long-term.

The company also made no tangible effort to mitigate the impact of the dismissal on the employee or his career path, the Court found. 

Particularly in cases where misconduct isn’t clear-cut or where the employee has a long-standing history of hard work and good behaviour, Zhang recommends a number of steps HR can consider to lessen the adverse impact of a dismissal. 

“HR could consider offering an employee a statement of service to assist with their efforts to obtain alternative employment,” she says. 

“If appropriate… employers might wish to dismiss on notice rather than effecting a summary dismissal to give employees some additional salary and time during the notice period to find alternative employment.”

This ruling is a stark reminder of the far-reaching consequences of mishandled dismissals for all parties involved. Employers’ best line of defense against similar claims will be rigid adherence to the principles of procedural fairness in a dismissal, says Zhang.

“A person should [always] be properly put on notice of any allegations and the potential consequences of adverse findings, they should have a reasonable opportunity to respond, either orally or in writing, they should be afforded access to support networks and services, and should be provided with an outcome of the investigation, including an overview of any findings and the consequences for that person.”

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